Non-QM Loans in Tennessee: Types, Requirements and How They Differ
What makes a mortgage non-QM, the main programs for self-employed borrowers, investors and retirees, and the down payment and credit they need.
Quick answer
A non-QM loan is a mortgage that doesn’t follow the federal Qualified Mortgage rules or Fannie Mae, Freddie Mac, FHA or VA guidelines. It lets lenders verify income in other ways: bank statements, a CPA-prepared P&L, 1099s, assets, or a rental property’s rent.
Expect 10%–20% down on a home you live in, 20%–25% on a rental, credit from about 600 to 700, and generally higher rates than conventional loans.
Program ranges on this page were compiled in October 2026 from published 2026 guidelines of national non-QM investors and the CFPB’s Regulation Z (listed in the sources table). Program terms and eligibility are subject to lender guidelines and may change.
At a glance: non-QM loans in Tennessee
- What “QM” means: a federal safe-harbor category under Regulation Z
- Types: bank statement, P&L, 1099, asset depletion, DSCR, interest-only, recent credit event
- Down payment: 10%–20% owner-occupied; 20%–25% investment
- Credit: about 600 to 700 minimum; best terms at 700–740+
- Debt-to-income: up to 50% at most lenders
- After bankruptcy or foreclosure: commonly 12–48 months, with less leverage on shorter waits
What is a qualified mortgage, and what makes a loan non-QM?
Under the CFPB’s Regulation Z § 1026.43, every lender must make a reasonable, good-faith determination that you can repay a home loan. A qualified mortgage (QM) is a loan that meets extra conditions and gives the lender legal protection. A QM can’t have interest-only payments, negative amortization, a balloon payment or a term over 30 years, and its points and fees are capped (3% on loans of $137,958 or more in 2026). Since 2021 the general QM test is price-based, replacing the old 43% debt-to-income cap.
A non-QM loan falls outside those conditions, most often because income is documented without tax returns, or the loan is interest-only. The lender still has to verify your ability to repay. Rental loans made for business purposes, such as DSCR loans, are outside the rule altogether.
What types of non-QM loans are there?
| Program | How you qualify | Who it fits |
|---|---|---|
| Bank statement | 12 or 24 months of deposits, less an expense factor | Self-employed borrowers with heavy write-offs |
| P&L | A CPA-, EA- or CTEC-prepared profit and loss statement | Business owners with a strong recent year |
| 1099 | 1 or 2 years of 1099s, less an expense factor of at least 10% | Independent contractors and commission earners |
| Asset depletion (asset utilization) | Eligible assets ÷ 60 to 120 months, treated as income | Retirees and borrowers with large savings but little income |
| DSCR | The rental property’s rent ÷ its payment | Real estate investors |
| Recent credit event | Standard or alternative documentation, with a shorter wait after bankruptcy or foreclosure | Borrowers re-established after a hardship |
| Interest-only and non-QM jumbo | Full or alternative documentation, loans up to about $3.5–$5 million | High-net-worth and high-balance borrowers |
Sources: MAXEX Non-QM Program Guide v13; LoanStream Non-QM Matrix (Aug 5, 2026); A&D Mortgage Product Matrix (Aug 31, 2026). Not every lender offers every program. Program terms and eligibility are subject to lender guidelines and may change.
How much down payment and credit do you need for a non-QM loan?
| Requirement | Common range in 2026 guidelines |
|---|---|
| Minimum credit score | About 600 to 700; the highest loan-to-value tiers usually need 680–740 |
| Owner-occupied, purchase | Up to 85%–90% LTV (10%–15% down) |
| Investment property | Usually 75%–85% LTV; DSCR usually 75%–80% |
| Debt-to-income | Up to 50%; 45% at the highest LTVs |
| Reserves | None to 12 months, depending on program, LTV and loan size |
Sources: the lender guidelines listed under “Where these figures come from”. Program terms and eligibility are subject to lender guidelines and may change.
How does asset depletion turn savings into income?
The lender adds up eligible assets, applies a discount to anything that isn’t cash, and divides by a set number of months. One 2026 guide counts cash at 100%, stocks and bonds at 85% and retirement accounts at 80%, and divides by 120 months; others divide by 60. Assets used for the down payment, closing costs and reserves are subtracted first.
| Item | Divided by 120 | Divided by 60 |
|---|---|---|
| Eligible assets after down payment and reserves | $1,200,000 | $1,200,000 |
| Qualifying monthly income | $10,000 | $20,000 |
Illustrative example only. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. Sources: MAXEX Non-QM Select 5 Guide v9 (120 months); A&D Mortgage and LoanStream asset utilization programs (60 months). Subject to lender guidelines and may change.
To try your own numbers, including the property tax for a specific Tennessee address, use the Tennessee mortgage calculator.
Can you get a non-QM loan after bankruptcy or foreclosure?
Yes, often sooner than with agency loans, but with more down. One 2026 matrix allows a loan more than 36 months after the event at standard terms, more than 24 months with 10% less leverage, and more than 12 months with 15% less. Other lenders want 36 to 48 months. For comparison, FHA generally waits two years after a Chapter 7 discharge and three after a foreclosure. Program terms are subject to lender guidelines and may change.
What are the catches with non-QM loans?
- Rates and fees are generally higher than on conventional, FHA or VA loans, because these loans are held or sold to private investors.
- Larger down payments and reserves are the norm.
- Guidelines change more often than agency rules, and they differ a lot between lenders.
- Prepayment penalties are common on investment loans; federal rules generally keep them off owner-occupied non-QM loans.
- Many borrowers use non-QM as a bridge and refinance into a conventional loan later, which depends on qualifying at that time.
Non-QM loan FAQ
Are non-QM loans safe?
They are regulated mortgages, not subprime loans of the 2000s. Lenders must still verify your ability to repay on owner-occupied loans, and the programs usually require more down and more reserves. The trade-off is cost: they generally carry higher rates and fees than agency loans.
What credit score do you need for a non-QM loan?
Published 2026 guidelines start around 600 to 700, depending on the program. Lower scores usually mean a smaller loan-to-value and more reserves; the best terms generally need 700 to 740 or higher. Program terms and eligibility are subject to lender guidelines and may change.
How much down do you need for a non-QM loan?
Usually 10% to 20% on a home you’ll live in and 20% to 25% on a rental. P&L-only programs often require 20% to 30%. The exact figure depends on credit score, loan size and documentation type. Program terms are subject to lender guidelines and may change.
Can you refinance out of a non-QM loan later?
Often, yes. Once your tax returns show enough income, or your credit event is far enough behind you, you may qualify for a conventional or FHA refinance. Check for a prepayment penalty first, and compare closing costs against the savings.
Who should consider a non-QM loan?
Self-employed borrowers whose tax returns understate their income, retirees with assets but little income, real estate investors, and borrowers recovering from a recent credit event. If you qualify for a conventional, FHA or VA loan, that is usually worth comparing first.
Where these figures come from
| Figure | Source | As of |
|---|---|---|
| Ability-to-repay and QM rules, points-and-fees cap | CFPB, Regulation Z § 1026.43 | 2026 thresholds |
| What a qualified mortgage is | CFPB, What is a Qualified Mortgage? | Reviewed Jan 2, 2025 |
| Price-based general QM | CFPB, General QM final rule | Mandatory Oct 1, 2022 |
| Program list, income methods, asset depletion | MAXEX Non-QM Guide v13; Select 5 Guide v9 | Jan–Mar 2026 |
| Credit and LTV grids, credit-event seasoning | LoanStream Wholesale Non-QM Matrix | Effective Aug 5, 2026 |
| Product LTVs, asset utilization divisor | A&D Mortgage Product Matrix; asset utilization | Aug 31, 2026 |
| FHA waiting periods | HUD Handbook 4000.1 | Current handbook |
Related guides
- Bank statement loans, P&L loans and DSCR loans.
- What to do after a mortgage denial.
- What are the different types of home loans?
- Metro Nashville borrowers: how I work as a Nashville mortgage broker.
- About Christopher Armantrout, the licensed originator who wrote this page.
Call me at (615) 671-9178. I’ll check whether a conventional, FHA or VA loan works first, and if it doesn’t, which non-QM program fits how you actually earn.
If it’s after hours, grab a time on my calendar, or start an application and I’ll review it and reach out with a plan.
Valor Mortgage, LLC · Christopher Armantrout, Mortgage Loan Originator, NMLS #1210804 · Valor Mortgage, LLC is powered by Encore Lending Group, LLC, NMLS #1249911 · Licensed in Tennessee · Equal Housing Opportunity
724 S Main St, Springfield, TN 37172 · (615) 671-9178 · christopher@valor.mortgage · NMLS Consumer Access
The dollar figures on this page are illustrative examples for general information only and are not an offer, a rate quote, or a commitment to lend. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. Program fees, limits and terms are set by the agencies named above and change without notice; all loans are subject to credit approval, income verification and property appraisal. Not all applicants will qualify.