The Rise of Non-QM Lending: Meeting Modern Borrower Needs with Smart, Flexible Solutions

In today’s dynamic housing market, the mortgage landscape is evolving faster than ever before. With millions of borrowers falling outside traditional lending boxes, the rise of non-qualified mortgage (non-QM) lending represents one of the most important shifts in the mortgage industry. For lenders, brokers, and originators looking to stay ahead, understanding the non-QM opportunity is not just strategic—it’s essential.

At American Heritage Lending (AHL), we’ve built our business on meeting the needs of today’s modern borrower. From gig workers and self-employed professionals to seasoned real estate investors and international buyers, we offer a wide suite of non-QM programs tailored to real-life financial profiles. We believe in providing common-sense lending solutions that are as diverse as today’s borrowers—and as forward-thinking as tomorrow’s market demands.

Understanding Non-QM: A Brief Historical Context

Non-QM loans were created in response to the rigid lending standards introduced in the aftermath of the 2008 financial crisis. When the Dodd-Frank Act introduced the Qualified Mortgage (QM) rule in 2014, it aimed to protect borrowers by enforcing strict debt-to-income limits, documentation standards, and product feature restrictions. While well-intentioned, these changes also unintentionally excluded millions of qualified borrowers who didn’t fit neatly into traditional lending molds.

This included entrepreneurs with fluctuating income, investors with rental income as their primary source, and retirees living off assets. The result was a growing number of borrowers who, despite financial strength, could not access conventional financing. The market responded with the emergence of non-QM products—loan programs designed to meet Ability-to-Repay (ATR) standards while offering alternative paths to qualification.

Initially, non-QM lending was a niche product, offered by a handful of lenders to select borrowers. But by 2018, the space began to gain traction. As the gig economy expanded and investor activity surged, more lenders entered the market with competitive non-QM offerings. The COVID-19 pandemic briefly stalled this momentum due to liquidity concerns, but since 2021, non-QM lending has rebounded sharply. In 2024, non-QM loans accounted for over $40 billion in securitized volume, and projections for 2025 suggest further acceleration.

Many industry experts now forecast that non-QM lending could reach 10% of the total mortgage market by 2028. This marks not just a resurgence—but a revolution—in how the mortgage industry views creditworthiness and qualification.

Market Drivers: Why Non-QM Is Booming

Several macro and microeconomic forces are aligning to propel the non-QM market forward. These include:

• The Rise of the Self-Employed: There are now more than 10 million self-employed Americans, according to the U.S. Bureau of Labor Statistics. These borrowers represent a substantial and growing segment of the economy. However, their tax returns often reflect reduced income due to business deductions, making them less likely to qualify for agency loans. Non-QM bank statement loans address this challenge by evaluating actual cash flow over 12–24 months of deposits, offering a more accurate view of income.
• Expanding Real Estate Investment: Real estate investors are becoming a dominant force in the housing market. CoreLogic reports that in some metro areas, investor purchases accounted for over 26% of home sales in 2024. Investors often reach agency lending limits on property count or encounter restrictive DTI thresholds. DSCR-based non-QM loans offer scalable options that allow investors to qualify based on property income alone—without requiring personal income or employment documentation.
• The Gig Economy and Contract Workforce: According to a 2023 Pew Research Center study, more than 36% of U.S. adults participate in freelance, contract, or gig work. This trend is expected to rise, particularly among younger generations. Non-QM 1099 income loans fill the gap by allowing these borrowers to qualify using 1099 forms instead of traditional W-2s, opening up opportunities for millions of independent workers who were previously underserved.
• High-Net-Worth Borrowers with Low Taxable Income: Capgemini’s World Wealth Report shows that the U.S. is home to over 7 million high-net-worth individuals (HNWIs). Many of these borrowers have significant liquid assets but lack steady income or are in retirement. Non-QM asset qualifier loans allow them to qualify based on their net worth, using a depletion model to determine repayment capacity. This program is especially popular among retirees, recent business sellers, or trust beneficiaries.
• International Investment in U.S. Real Estate: According to the National Association of Realtors, foreign nationals invested approximately $54 billion in U.S. residential real estate in 2023. States like Florida, California, and Texas continue to attract international buyers. Most of these buyers do not have U.S. credit history or W-2 income, and often face insurmountable barriers with traditional lenders. Non-QM Foreign National programs, like those offered by AHL, provide a solution by evaluating international credit and verifying assets held overseas.
• Constrained Housing Supply and Home Price Growth: Persistently low inventory and rising home prices have made affordability and qualification more complex. According to Redfin, the median home price in the U.S. hit a record high of over $425,000 in early 2024. As borrowers stretch to purchase homes, many exceed agency DTI thresholds or require jumbo financing—creating more demand for flexible underwriting solutions like non-QM.

Together, these drivers illustrate a housing market in transition—where traditional loan products are no longer sufficient to meet borrower needs. Non-QM lending is no longer an edge case. It’s becoming central to how modern borrowers buy, refinance, and invest in property.

For brokers and lenders who understand how to leverage these market forces, non-QM offers both a strategic advantage and a mission-critical service model for the future of home financing.

Non-QM Lending by the Numbers: Market Size and Forecast

The non-QM mortgage sector has experienced a significant evolution over the past decade. Once considered a niche product, non-QM loans have grown into a mainstream solution for borrowers who fall outside conventional lending parameters. The numbers tell a compelling story of resilience, demand, and future potential.

Year	Non-QM Market Share	Securitized Volume	Key Highlights
2018	~4%	~$20B	Early growth as lenders expand non-QM offerings
2019	~5%	~$25B	Peak pre-COVID year with investor enthusiasm building
2020	<3%	~$8B	Market contraction due to COVID-related liquidity shock
2021	~4%	~$20B	Strong rebound; non-QM returns as lenders and investors regain confidence
2022	~4.5%	~$29B	Increasing securitizations and product diversification
2023	~5%	~$35B	Market stabilizes despite interest rate volatility
2024	~5.5%	~$40B+	Continued growth, with record issuance in private-label MBS
2025 (F)	6–8% (base case)	$45–50B	Forecasted expansion driven by gig economy and investor demand
2028 (F)	8–10% (bull case)	$60–70B+	Potential doubling of market share as non-QM becomes essential to home financing

What’s Driving This Growth?

• Borrower Demand: As traditional guidelines remain restrictive and the number of self-employed, freelance, and asset-based borrowers increases, the addressable non-QM borrower pool continues to expand. The Urban Institute estimates that up to 20% of mortgage applicants don’t qualify under QM standards but could still repay responsibly.
• Investor Appetite: Non-QM securities have become a preferred asset class among private investors and institutional buyers. In 2024, over 30% of all non-agency RMBS issuance was backed by non-QM loans, per S&P Global. These products offer higher yields and more insulation from prepayment risk compared to agency MBS.
• Product Innovation: The industry has matured beyond basic bank statement loans. Lenders like AHL now offer a full suite of programs tailored to investors (DSCR), international buyers (Foreign National), and retirees (Asset Qualifier), opening up entirely new channels of business.
• Regulatory Stability: With no major ATR/QM rule changes on the horizon, lenders and investors have gained confidence in the long-term viability of non-QM products. Programs have standardized, and credit performance has remained solid—even through market cycles.

Looking Ahead:

If current growth continues, non-QM lending could reach or exceed $70 billion in annual volume by 2028, representing close to 10% of total mortgage originations. As rates normalize and home affordability challenges persist, the role of non-QM will only become more pronounced. Non-QM is no longer a backup option—it’s increasingly a primary channel for millions of qualified borrowers.

Popular Use Cases: Who Benefits from Non-QM Loans?

Non-QM loans are designed to serve borrowers who don’t fit inside the rigid boxes of conventional lending—yet still demonstrate strong creditworthiness and repayment ability. From self-employed professionals to global investors, these products unlock financing for a diverse and growing group of applicants.

Let’s explore key borrower profiles and how non-QM products meet their unique needs:

1. The Self-Employed Entrepreneur
   Use Case: A restaurant owner, marketing agency founder, or gig economy worker whose tax returns don’t reflect actual income.

• Challenge: Tax write-offs reduce reported income, causing a low debt-to-income (DTI) ratio under agency guidelines.
• Solution: Bank Statement Loans evaluate income using 12–24 months of business or personal bank deposits, offering a more accurate cash flow picture.
• Market Insight: According to the IRS, more than 27 million U.S. taxpayers filed a Schedule C in 2023, indicating self-employment—representing a massive addressable market.

2. The Real Estate Investor
   Use Case: An experienced landlord or short-term rental owner looking to acquire, refinance, or pull cash out of a rental property.

• Challenge: Conventional lenders cap financed properties (often at 10), require personal income documentation, and have tight DTI restrictions.
• Solution: DSCR (Debt-Service Coverage Ratio) Loans qualify borrowers based on rental income relative to the mortgage payment—no employment or personal income required.
• Market Insight: Investor home purchases surged 8% in 2023 despite rising rates, per Redfin. Non-QM DSCR loans make up an estimated 30–40% of all non-QM originations by volume.

3. The Independent Contractor or 1099 Earner
   Use Case: A real estate agent, traveling nurse, or IT consultant earning income from multiple sources or clients.

• Challenge: These borrowers often lack W-2s and may have inconsistent income streams across multiple 1099 forms.
• Solution: 1099 Income Loans allow borrowers to qualify based on one or two years of 1099s, with no tax returns required.
• Market Insight: Pew Research estimates that 36% of American adults have engaged in some form of contract, freelance, or gig work—many of whom are ideal non-QM candidates.

4. The Retired or High-Net-Worth Borrower
   Use Case: A retired couple with millions in liquid assets but no active income, or a tech founder post-exit with low monthly earnings.

• Challenge: Conventional loans require verifiable monthly income, even when asset levels clearly support the loan.
• Solution: Asset Qualifier Loans allow borrowers to qualify based on liquid assets (stocks, savings, retirement accounts), often using a depletion formula over 60 months.
• Market Insight: The U.S. had over 7 million high-net-worth individuals in 2023 (Capgemini). Many are income-light but asset-rich and need non-QM options to access leverage.

5. The Foreign National Buyer
   Use Case: An international buyer—such as a Canadian investor or Latin American entrepreneur—seeking to purchase property in the U.S.

• Challenge: No U.S. income, employment, or credit history to qualify through conventional means.
• Solution: Foreign National Loans evaluate international credit reports or references and focus on asset strength and property cash flow (often via DSCR).
• Market Insight: According to NAR, foreign buyers accounted for $54 billion in U.S. residential property purchases in 2023. Non-QM is often the only viable financing path for these buyers.

6. The Near-Prime Borrower with a Credit Event
   Use Case: A high-income borrower recovering from a recent foreclosure, bankruptcy, or short sale.

• Challenge: Agency and jumbo programs typically require a 4–7 year waiting period after major credit events.
• Solution: Full Doc / Near-Prime Loans offer flexible credit criteria with as little as 1–2 years seasoning, and allow higher DTIs or non-warrantable properties.
• Market Insight: TransUnion data shows that millions of Americans have “prime potential” but fall into near-prime due to isolated financial setbacks.

Non-QM Program Overview: Smart Products for Complex Profiles

At AHL, our programs are engineered for performance and accessibility. Here’s a breakdown of our most in-demand non-QM offerings:

Bank Statement Loans

• Income calculated using 12–24 months of bank deposits
• No tax returns or W-2s required
• Flexible expense factor options for business owners
• Perfect for: Self-employed borrowers, gig economy earners, and entrepreneurs

1099 Income Loans

• Borrowers qualify using 1–2 years of 1099s plus optional YTD verification
• No tax returns necessary
• Designed for: Independent contractors, realtors, nurses, and creatives

DSCR Investor Loans

• Qualification based on rental income vs. property expenses (DSCR ≥ 0.75–1.0)
• No personal income or employment documentation
• Ideal for: Experienced or first-time investors, buy-and-hold landlords

Foreign National Loans

• No U.S. income or credit required
• Assets verified via international accounts
• Available for: Vacation homes or investment properties in the U.S.

Asset Qualifier Loans

• Borrowers qualify based on liquid asset levels post-closing
• No income or employment documentation needed
• Great for: Retirees, wealth managers, or clients living off investments

Full Doc / Near-Prime Loans

• Full income and employment documentation required
• Flexible credit and DTI allowances
• Designed for: Borrowers with recent credit events, high DTIs, or unique income types

Each of these programs was built with a single mission in mind: make homeownership and investment accessible for qualified borrowers who deserve more than one-size-fits-all underwriting.

Compliance and Confidence: Built on a Foundation of ATR

Non-QM lending today is far removed from the risky practices of the pre-2008 subprime era. The modern non-QM sector is built on strict compliance, sound risk management, and full alignment with federal lending regulations—particularly the Ability-to-Repay (ATR) rule.

Here’s how AHL ensures responsible lending:

• Documented Ability-to-Repay: Whether using bank statements, assets, or rental income, all loans must clearly demonstrate the borrower’s ability to repay the loan.
• Robust Credit Evaluation: Non-QM borrowers often have credit scores in the high 600s to 700s, and many have significant reserves, large down payments, or both.
• Investor Confidence: Secondary market demand for non-QM mortgage-backed securities (MBS) has grown due to the consistent performance of these loans—many of which outperform legacy QM loans in terms of delinquency rates.

Fitch Ratings, DBRS Morningstar, and S&P Global have all noted the relatively low early delinquency rates and credit enhancements across modern non-QM loan pools. That speaks to the strong fundamentals—and responsible execution—of lenders like AHL.

Bottom line: non-QM loans meet regulatory standards and investor expectations, and they deliver solutions to borrowers who would otherwise be locked out of homeownership or investment opportunities.

The Opportunity for Brokers and Correspondents

As a mortgage professional, your ability to adapt to changing borrower needs can be the single most important factor in your success. Non-QM lending gives brokers and correspondents an unmatched opportunity to diversify their offerings, increase deal flow, and serve a broader client base that has been underserved by traditional lenders.

According to CoreLogic, the number of borrowers who fall outside of agency lending guidelines has increased steadily over the last five years, with an estimated 15–20% of mortgage applicants now considered non-QM eligible. However, non-QM originations make up only about 5–6% of total market volume, suggesting a significant underserved market—and a massive opportunity for brokers who know how to tap into it.

In fact, a 2024 survey by the Mortgage Bankers Association (MBA) found that 72% of mortgage brokers believe non-QM loans will account for a larger portion of their business in the coming years, and over half reported closing at least one non-QM loan per month, up from 28% in 2021.

Here’s why brokers and correspondents are increasingly turning to AHL’s non-QM platform:

• New Borrower Segments = New Revenue Streams: From self-employed entrepreneurs to international buyers and investors, non-QM allows brokers to unlock new pipelines that conventional lenders can’t serve.
• Stronger Margins: Non-QM loans typically command higher rates and fees, resulting in better revenue per loan and improved profitability.
• Less Rate Shopping, More Loyalty: Because non-QM lending is relationship-driven and less commoditized, borrowers are more likely to stay loyal to a broker who can solve their unique financing needs.
• Resilience During Market Downturns: In 2022 and 2023, many brokers turned to non-QM as agency refinance business dried up. Non-QM originations remained strong thanks to ongoing demand from investors and business owners.

When you partner with AHL, you get more than product access—you get a strategic ally:

• Direct access to cutting-edge non-QM programs with real-time pricing
• In-house underwriting with rapid turn times and scenario desk support
• Experienced account executives with deep non-QM knowledge
• White-label marketing, co-branded materials, and borrower education tools

We believe the brokers and correspondents who embrace non-QM now will not only survive—but thrive—in the mortgage markets of tomorrow. Whether you’re helping a retiree buy their dream home or enabling an investor to expand their portfolio, AHL empowers you to say “yes” when others say “no.”

Looking Ahead: A Sector on the Rise

The future of non-QM lending is bright—and accelerating. What was once viewed as a niche market for “outside-the-box” borrowers is now solidifying its role as a resilient, scalable, and essential pillar of the modern mortgage ecosystem. As borrower profiles become more complex and conventional loan programs continue to tighten, non-QM lending is emerging as the bridge between borrower reality and mortgage accessibility.

Industry projections from S&P Global Ratings and CoreLogic forecast that non-QM originations could reach $60–70 billion annually by 2028, up from approximately $40 billion in 2024. This would represent close to 10% of total U.S. mortgage originations, a sharp rise from the current 5–6%. Analysts agree: as home prices stay elevated, the gig economy expands, and traditional underwriting standards remain rigid, non-QM will become an increasingly vital option for lenders and borrowers alike.

A 2023 report from Fitch Ratings noted that non-QM lending continues to see strong and stable demand in both purchase and refinance markets—particularly among real estate investors, retirees, and self-employed professionals. These borrower segments are growing rapidly, and they need solutions that accommodate their unique income and credit profiles. Notably, non-QM loans accounted for over 30% of all non-agency RMBS issuances in 2024, according to S&P Global. That surge reflects growing confidence from institutional investors, who value the consistent performance and diversified risk profile these loans provide.

Borrower eligibility within the agency space is also tightening. The Urban Institute estimates that nearly 1 in 5 mortgage applicants in 2024 were denied by conventional lenders despite having solid credit scores and sufficient assets. These are not risky borrowers—they’re simply underserved by legacy underwriting frameworks. Non-QM steps in to fill that gap with thoughtful, data-driven, ATR-compliant alternatives.

Looking beyond 2025, several macroeconomic and demographic trends suggest that non-QM lending is not just a stopgap—it’s a structural evolution:

• The freelance and gig economy continues to grow. By 2030, as much as 50% of the U.S. workforce may be self-employed or contract-based, according to McKinsey. These workers often lack W-2 income but maintain high earning power—making non-QM their best-fit solution.
• Real estate investing is on the rise. Millennials and Gen Z are entering the investor market earlier, fueling demand for DSCR products and alternative financing tools.
• Wealth transfer is reshaping borrower profiles. With over $84 trillion expected to be passed down by Baby Boomers to younger generations by 2045 (Cerulli Associates), more borrowers will be asset-rich but income-light, requiring solutions like AHL’s Asset Qualifier loan.
• International investment remains strong. Foreign nationals purchased $54 billion in U.S. real estate in 2023, and most will continue to rely on non-QM Foreign National loan programs for financing due to lack of U.S. credit history.

Meanwhile, regulatory conditions remain favorable. The CFPB’s introduction of the price-based QM standard has clarified the delineation between QM and non-QM, giving lenders the green light to innovate confidently within a well-defined compliance framework.

Let’s Build the Future of Lending—Together

As the mortgage industry continues to evolve, success will belong to those who adapt, innovate, and serve borrowers with transparency and creativity. At American Heritage Lending (AHL), we’re not just watching the non-QM market grow—we’re leading the charge.

For brokers and correspondents, the opportunity is now. Non-QM lending is no longer a niche product—it’s a vital tool in your portfolio. Borrowers are coming to you with complex income profiles, unique asset positions, and investment ambitions that don’t fit neatly into an agency box. With AHL, you can say yes to more of those borrowers—and close more of the deals that your competitors are turning away.

Here’s how we make that possible:

• Dedicated Non-QM Expertise: Our underwriters and AEs live and breathe non-QM. Whether it’s a 10-property DSCR portfolio or a 1099 contractor with three income streams, we understand the nuance—and we know how to structure your loan to get it done.
•  Speed and Efficiency: We’re built for velocity. With in-house underwriting, direct access to credit decision-makers, and a fully optimized processing workflow, we help you move from submission to CTC faster—often in 10–12 business days.
• Broker-Centric Tech + Tools: From scenario calculators and bank statement analysis templates to co-branded marketing assets, our goal is to make you more competitive and more efficient—without adding to your workload.
• A Growing Suite of Solutions: Whether it’s launching new programs for ITIN borrowers, offering expanded DSCR guidelines, or pioneering interest-only jumbo options, we’re investing in products that solve real-world problems—and help you build future-ready pipelines.

The next decade of lending will look nothing like the last. Borrower demographics are shifting. The traditional W-2 borrower is becoming less common. Asset-based lending is on the rise. Investment-driven homeownership is exploding. And flexibility, once a competitive edge, is now a necessity.

At AHL, we’re committed to partnering with originators who want to do more than close loans—we’re looking to build long-term, strategic relationships with professionals who want to redefine what’s possible in mortgage lending.

Whether you’re a seasoned non-QM expert or just beginning to explore this space, we invite you to join us.

Start a scenario today at ahlendtpo.com, or connect with your Account Executive to learn how AHL can help you close your next complex deal—quickly, confidently, and compliantly.

Together, we’re not just funding homes—we’re reshaping access, opportunity, and the future of lending.