Non-QM rates sit above conventional financing across every program, but the size of that premium varies considerably by program type, and within each program by the same drivers that move any mortgage rate. This page explains where the pricing comes from so you can tell a genuine quote from an advertised floor.
Why Non-QM Prices Above Conventional
Three structural reasons, and none of them are negotiable:
- Secondary market liquidity. Conventional loans sell into a deep, standardised agency market. Non-QM loans trade in a smaller private market, and that difference in liquidity shows up as price.
- Manual underwriting. A human reads every Non-QM file. That is precisely what allows the flexibility, and it costs more to deliver than an automated agency decision.
- Alternative documentation. Qualifying on deposits, assets, or property income rather than verified tax returns carries different risk characteristics, and pricing reflects that.
The useful comparison is rarely Non-QM versus conventional. If conventional will approve your file, take it — the rate difference is real. Non-QM earns its cost when conventional will not, and then the alternative is not a cheaper loan; it is no loan.
How Pricing Differs by Program
| Program | Relative pricing | Why |
|---|---|---|
| DSCR | Generally the most competitive Non-QM tier | Well-established, high volume, collateral-focused, standardised underwriting |
| Bank Statement | Moderate premium | Income is documented but derived, requiring analyst review |
| P&L | Moderate premium, similar to bank statement | Relies on prepared statements and preparer verification |
| Asset Depletion | Moderate | Assets are verifiable and liquid, but income is imputed rather than earned |
| Foreign National | Highest premium of the common programs | Verification complexity and collection considerations |
| ITIN | Above standard programs | Smaller lender pool and additional documentation requirements |
The Shared Rate Drivers
Within any program, the same five variables set your specific number:
- Credit score — the largest single driver, with steeper tier spreads than agency loans
- Leverage (LTV) — higher leverage prices higher, with meaningful steps between tiers
- Loan purpose — purchase prices best, then rate-and-term refinance, then cash-out
- Property type — single-family long-term at the friendly end; condotels, non-warrantable condos, and short-term rentals carry adjustments
- Qualifying strength — the DSCR ratio on an investor loan, or the qualifying income figure on an owner-occupied program
Structure Choices That Affect Rate
- Fixed vs ARM. Thirty-year fixed is the most common structure. ARMs typically start lower and carry adjustment risk after the initial period.
- Interest-only. Usually carries a pricing adjustment relative to the same loan amortising, but lowers the qualifying payment — which on a DSCR loan can move you into a better ratio band.
- Prepayment penalty. Accepting a longer declining penalty typically lowers the rate. Buying it down raises the rate. Match this to your actual hold plan rather than defaulting either way.
- Points. Paying origination points buys a lower rate. Whether that pays back depends entirely on how long you hold — run the breakeven, not the headline.
- Lock period. Longer locks price higher because the lender carries more risk on your behalf.
Comparing Non-QM Quotes
Compare the total cost of the loan over the period you actually intend to hold it, at your actual scenario. That means rate plus points plus lender fees plus the expected cost of the prepayment structure — not the rate alone.
And compare the same scenario at each lender. Because overlays differ, one lender's 75% LTV quote and another's 80% quote on the same property are not the same product, and the cheaper-looking one may simply be the more conservative offer.
Figures on this page describe what is typical across the DSCR and Non-QM market, gathered from published lender guidelines. They are not a quote. Every lender sets its own overlays, and your actual terms depend on the property and your profile — send us the scenario for real numbers.
