What’s the difference between conventional and non-QM financing?

Conventional real estate financing refers to loans and other financing options that are offered by traditional financial institutions, such as banks, credit unions, and mortgage companies. These financing products are typically backed by the creditworthiness of the borrower and the underlying assets they pledge as collateral. Conventional real estate financing is typically subject to strict underwriting guidelines and may require a down payment.

Non-QM (non-qualified mortgage) real estate financing refers to loans and other financing options that do not meet the standards set forth by the Consumer Financial Protection Bureau (CFPB) for qualified mortgages. Non-QM financing may be more flexible than conventional financing in terms of the borrower's credit history, income, and debt-to-income ratio. However, non-QM financing may also involve higher risks for both borrowers and lenders and may be more expensive than conventional financing. Non-QM financing may be suitable for borrowers who do not meet the strict underwriting guidelines of conventional financing, but it may also be more difficult to obtain.