Are write-offs and uneven income making it hard to qualify for a mortgage in West Hills? You’re not alone. Many self-employed buyers and investors find that traditional underwriting doesn’t capture their real cash flow. This guide breaks down non-QM loan options that can fit self-employed buyers in West Hills, what lenders look for, and how to prepare a strong file. Let’s dive in.
What non-QM means
Non-QM stands for non-Qualified Mortgage. These loans don’t meet the CFPB’s Qualified Mortgage safe-harbor standards, but they are legal and widely used. Lenders still must determine your ability to repay, yet they can use alternative documentation and flexible underwriting. You can review the CFPB’s Ability-to-Repay and Qualified Mortgage rule for context on how QM and non-QM differ.
- Learn more about ATR/QM from the CFPB: Ability-to-Repay and Qualified Mortgage rule
- Non-QM can allow features like interest-only payments or alternative income calculations, usually at higher rates and fees. See a plain-English overview from Bankrate on non-QM loans.
Why it fits West Hills
West Hills home prices often sit near the million-dollar mark, which can push loan amounts toward high-cost conforming limits or into jumbo territory. For self-employed buyers, that price point makes flexible documentation especially useful. The 2025 one-unit conforming baseline is $806,500, and the high-cost ceiling (which applies in Los Angeles County) is $1,209,750. If your target loan exceeds these limits or standard guidelines, a portfolio or non-QM option may be the better path.
- Check 2025 limits: FHFA conforming loan limits
Common non-QM options
Bank-statement loans
Instead of W-2s and full tax returns, lenders average 12 to 24 months of business or personal bank deposits and apply an expense factor to calculate qualifying income. Programs typically prefer 2+ years of self-employment, minimum credit scores around 620 to 680, and down payments in the 10 to 20 percent range, with reserves required. This can be a strong fit if your tax write-offs make your adjusted income look low.
- How they work explained: Investopedia on bank-statement loans
DSCR loans for investors
Debt Service Coverage Ratio (DSCR) loans qualify primarily on the property’s cash flow rather than your personal debt-to-income. Lenders compare the rent to the mortgage payment and commonly look for a DSCR in the 1.0 to 1.25 range. Expect 20 to 30 percent down, standard appraisals, and rent documentation. These loans are designed for investment properties, not owner-occupied homes.
Asset-depletion programs
If you have significant liquid assets but lower taxable income, some lenders convert assets into qualifying “income” by dividing balances over a set term. This can help retirees, entrepreneurs with strong reserves, or buyers with substantial brokerage accounts.
- Overview of asset-based non-QM: Guide to non-QM programs
1099, P&L, or one-year return programs
For contractors and newer businesses, some lenders accept recent 1099s, year-to-date profit and loss statements, or a single year of tax returns. Requirements vary by lender, so it pays to compare documentation and pricing side by side.
ITIN, foreign-national, and jumbo portfolio
Specialty non-QM programs exist for non-citizen borrowers and for jumbo loan sizes that exceed conforming limits. Terms and eligibility vary widely, so focus on documentation, reserves, and pricing when you compare options.
What lenders look for
Documentation checklist
Gather core documents before you apply to keep timelines tight:
- 12 to 24 months of business and/or personal bank statements
- 1099s if applicable, plus a year-to-date profit and loss statement
- Business records (license, DBA, EIN) and government ID
- Proof of reserves (savings, brokerage, retirement)
- A CPA letter if the lender requests support for your expense factor or income method
Credit, down payment, and reserves
Non-QM lenders often look for minimum scores in the 620 to 680 range, with better pricing above 700. Bank-statement LTVs can reach the mid-80s in select cases with strong files, while investor DSCR loans commonly cap around 70 to 80 percent LTV. Plan on 3 to 12 months of reserves depending on the program and risk profile.
Rates, costs, and timing
Non-QM loans usually price above comparable conventional loans because of their flexible underwriting. In 2025 market coverage, non-QM usage has been rising, and pricing varies widely by product, credit, and LTV. It’s smart to request detailed, written quotes from multiple lenders and compare interest rate, APR, points, underwriting fees, and reserve requirements.
- Industry context: MarketWatch on rising non-QM issuance
Many experienced non-QM shops can close in roughly 2 to 4 weeks if your documentation is clean, though timelines depend on appraisal and lender volume. Submitting complete statements and responding quickly to conditions helps keep things on track.
Conforming limits and jumbo
In Los Angeles County, the high-cost conforming ceiling for 2025 is $1,209,750 for one-unit properties. If your loan amount stays at or below that level and meets agency guidelines, conventional financing may be possible. If you exceed it or your documentation doesn’t fit agency rules, you’ll likely need jumbo portfolio or non-QM.
- Reference: FHFA 2025 conforming loan limits
Smart steps to prepare
- Set a realistic price range and estimate the loan amount. Compare it to the 2025 FHFA limits to see if conforming is on the table.
- Organize 12 to 24 months of bank statements, 1099s, a YTD P&L, business records, ID, and proof of reserves.
- Ask targeted questions: months of statements required, expense factor on business deposits, minimum DSCR (if investing), reserves, rate/points, and any prepayment penalties.
- Get multiple, written quotes and compare APR and total cash to close.
- Verify your loan officer’s licensing in California. You can look up MLOs via the DFPI’s licensing page.
Risks and tradeoffs
Non-QM loans can solve for complex income, but you should be clear on costs. Expect higher rates and fees, and in some cases, prepayment penalties on investor products. Non-QM loans lack the QM safe-harbor protections, so always review disclosures and compare options carefully.
- Consumer-friendly overview: Non-QM pros and cons
Ready to explore your options?
If you’re self-employed and shopping in West Hills, you don’t have to navigate this alone. With in-house mortgage expertise and hyperlocal market guidance, Newline Grp can help you compare non-QM, jumbo, and conventional paths and package your file for a smoother close. Let’s make a plan that fits your income and your next home. Hablamos español.
FAQs
What is a non-QM loan for self-employed buyers?
- It’s a legal mortgage that doesn’t meet the CFPB’s QM safe-harbor rules and often uses alternative documentation like bank statements to verify your ability to repay.
How do bank-statement mortgages calculate income?
- Lenders average 12 to 24 months of deposits and apply an expense factor to estimate qualifying income, rather than relying on tax-return net income.
What DSCR do investor loans usually require?
- Many lenders look for a DSCR around 1.0 to 1.25, meaning the property’s rent covers the mortgage payment at or above break-even.
Are non-QM rates higher than conventional?
- Yes, they typically carry higher rates and fees due to added risk and flexible underwriting, so getting multiple written quotes is important.
What are the 2025 conforming loan limits in LA County?
- For one-unit homes, the high-cost ceiling is $1,209,750; loans above this typically require jumbo or non-QM financing.
How fast can a non-QM loan close in West Hills?
- With complete documentation and smooth appraisal timing, specialty lenders often close in about 2 to 4 weeks, though timelines vary.
