Non-QM Myths vs Facts
Dispelling misconceptions & revealing the truth about Non-QM lending.
Myth 1
"Non-QM loans are too expensive"
Facts:
- Agency LLPAs can add 100+ bps to conventional rates on cash-outs, investment properties, and lower credit scores.
- Non-QM programs often remove or reduce many of these add-ons, creating a competitive pricing advantage.
Myth 2
"Non-QM is too niche — there’s not enough demand"
Facts:
- Non-QM originations grew from 5.2% to 8.0% of total mortgage volume in one year.
- Non-conforming loans overall (including Non-QM + Jumbo) now make up nearly 17% of the market.
- Demand from self-employed borrowers, investors, and alternative income clients is growing rapidly.
Myth 3
"Non-QM is subprime all over again, like 2008"
Facts:
- Today’s Non-QM loans require fully documented income, reasonable credit scores, and significant skin in the game.
- Delinquency rates on Non-QM loans remain well below 2%, even through economic volatility.
- Modern Non-QM ≠ 2008 subprime. It’s built on creditworthy borrowers with nontraditional income profiles.
Myth 4
"Non-QM loans are only for high-risk borrowers or those with bad credit"
Facts:
- Many Non-QM borrowers are self-employed professionals, real estate investors, or retirees with strong assets.
- Non-QM programs often serve prime borrowers who need alternative documentation, such as bank statements, CPA letters, or asset utilization.
- These are quality loans — just outside the conventional credit box.
Myth 5
"Non-QM underwriting is more challenging with strict guidelines"
Facts:
- Non-QM underwriting often uses common-sense guidelines and flexible documentation options.
- Arc Home uses experienced underwriters who specialize in Non-QM, making approvals faster and simpler than expected.
- Some brokers find Non-QM easier to qualify than conventional loans with rigid agency rules.
Myth 6
"Non-QM loans take too long to close"
Facts:
- Arc Home delivers 1-day underwriting turn times and many Non-QM loans go clear-to-close in under 15 business days.
- Modern technology + Non-QM expertise = fast, smooth closings that rival or even beat conventional timelines.
Myth 7
"Non-QM loans aren’t scalable"
Facts:
- Many brokers think Non-QM means one-off deals, but volume tells a different story.
- With growing market share (now nearly 17% of total mortgage volume) and repeat referral opportunities, Non-QM loans can be a consistent pipeline builder.
- Brokers who embrace Non-QM often see higher profitability per loan than conventional business.
Myth 8
"As rates drop, Non-QM demand will disappear "
Facts:
- Even when agency rates fall, LLPAs still hit many borrowers hard — especially on cash-outs, investment properties, and self-employed borrowers.
- Borrowers with nontraditional income or credit factors outside agency guidelines will continue to need Non-QM solutions regardless of rate cycles.
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