Non-QM First

A broker-first approach

When the agency path does not work, the deal may not be dead. Non-QM First is a different way to look at the borrower, the property and the financing challenge before assuming there is no path forward.

Mortgage brokers see it every day: a borrower has strong cash flow but significant business write-offs. A successful 1099 professional does not have traditional W-2 income. A real estate investor has a property that falls outside the conventional agency box. A high-net-worth borrower has substantial assets but limited reportable income. Or a strong borrower qualifies, but the condo project creates the problem.

Those situations are the idea behind Non-QM First.

Instead of letting the limitations of an agency loan determine whether you have a deal, start by asking a different question: Is there another way to document the income, evaluate the property or structure the transaction?

Watch the Non-QM First video

What Does Non-QM First Mean?

Non-QM First is not about forcing every borrower into a Non-QM loan. It is about recognizing that an agency obstacle is not always the same thing as a borrower problem.

A file may fall outside traditional guidelines because of the way income is documented, the type of property being financed, the borrower’s investment strategy, the structure of the transaction or another characteristic that does not fit neatly into an agency underwriting model.

That shift in thinking can help brokers take a second look at scenarios that might otherwise be dismissed too quickly.

1. Identify
2. Reframe
3. Explore
4. Structure
5. Submit

What Types of Scenarios Should Make You Think Non-QM First?

The strongest Non-QM opportunities often begin with borrowers or properties that make financial sense but do not fit neatly inside conventional documentation or eligibility requirements.

Other scenarios may involve larger loan amounts, short-term rentals, small multifamily properties, non-warrantable condos, LLC vesting, borrowers seeking alternative employment documentation or homeowners looking to access equity without replacing an existing first mortgage.

• Bank Statement: Consider whether deposits provide a more complete picture of a self-employed borrower’s cash flow.
• 1099-Only: Look beyond the absence of a traditional W-2 when the borrower has consistent 1099 earnings.
• Asset Qualifier: Consider whether eligible assets may support qualification when traditional income falls short.
• DSCR: Evaluate whether an investment property’s rental performance may support the transaction.
• WVOE: Explore whether an eligible salaried borrower may benefit from an alternative employment-income documentation approach.
• Jumbo: Consider Non-QM Jumbo and alternative-documentation solutions for borrowers with complex income profiles.
• Closed-End Second: Explore whether available equity may be accessed without replacing an existing first mortgage.
• Non-Warrantable Condo: Look beyond the borrower when the condo project itself creates the agency obstacle.

Explore the Pricer View Closed-End Seconds

How Brokers Can Use the Non-QM First Approach

1. Identify the real obstacle

   Start with why the agency path is not working. Is the issue income documentation, property type, credit history, loan size, vesting, project eligibility or the structure of the transaction?

2. Look at the complete scenario

   Consider the borrower’s overall financial profile, the property, the transaction and the documentation that may be available rather than focusing only on the element that caused the original approach to fail.

3. Explore another qualification path

   Determine whether a Bank Statement, 1099, Asset Qualifier, DSCR, WVOE, Non-QM Jumbo, Closed-End Second or another eligible Non-QM solution may better fit the scenario.

4. Send the scenario before you lose the deal

   When the file falls outside the agency box, submit the scenario to Foundation Mortgage so the complete transaction can be reviewed against available program options.

“An agency problem is not always a borrower problem.”

That is the core of Non-QM First. The goal is not to guarantee that every difficult file has a solution. It is to make sure a potentially viable borrower or property is not dismissed simply because the first financing approach did not work.

Follow Foundation Mortgage’s Non-QM First series for additional illustrative scenarios showing the types of borrowers, properties and financing challenges that may benefit from another look.

For mortgage industry professionals only. Educational information, not a commitment to lend or a guarantee of eligibility. Loan approvals are subject to applicable guidelines and underwriting. Foundation Mortgage Corporation · NMLS #5057 · Equal Housing Lender.