A non-QM loan is a home loan that does not meet the federal "Qualified Mortgage" (QM) rules. Under the CFPB's rules, a QM cannot have risky features like an interest-only period, a balloon payment, or a term longer than 30 years, and the lender must verify income or assets and debts in set ways. Non-QM loans still must follow the ability-to-repay rule, so the lender must check that you can pay. They are often used by self-employed buyers who qualify with bank statements, and by investors who qualify with a property's rent. They usually cost more than a standard loan, and terms vary by lender.
Most home loans in Nashville, Franklin, and Brentwood are Qualified Mortgages. FHA, VA, and USDA loans count as QM. Conventional loans sold to Fannie Mae and Freddie Mac must meet extra QM rules too. A non-QM loan sits outside that box. It is not a "bad credit" loan by name. It is just built a different way.
| Qualified Mortgage (QM) | Non-QM loan | |
|---|---|---|
| Interest-only period | Not allowed | Some lenders offer it |
| Balloon payment | Generally not allowed (small-lender exceptions) | Some lenders offer it |
| Loan term | 30 years or less | Some lenders offer 40-year terms |
| How income is checked | Verified income or assets and debts, in set ways | Must still check ability to repay, but may use bank statements, assets, or rent |
| Price limits | Limits on APR and up-front points and fees | No QM price limit; often a higher rate |
Terms vary by lender. Non-QM loans are not set by a government agency. Each lender writes its own rules for credit, down payment, rates, and paperwork, and those rules change often. Always ask for the lender’s current guidelines in writing.
No. It is a loan built outside the Qualified Mortgage rules. The lender must still check that you can repay. It often costs more, so compare it with any standard loan you qualify for.
Usually, yes. Rates and fees are often higher than a standard conventional loan. The gap depends on the lender, your credit, and your down payment.
Often you can, if you later qualify for a standard loan. Check for a prepayment penalty first, because some non-QM loans charge one.
Yes. DSCR loans qualify an investor on the property's rent, not personal income, so they sit outside the QM rules.
Yes. The CFPB says loans insured or guaranteed by HUD/FHA, VA, and USDA are qualified mortgages.
Yes. There is no single agency rulebook. Each lender sets its own credit, down payment, and paperwork rules.
Not sure if you need a standard loan or a non-QM loan? We can compare both. Call me at (615) 495-6594, email travis@heathrowmtg.com, or start an application.
Checked October 13, 2026. Non-QM terms are set by each lender and change often. This page is general information, not a loan offer.
