Recent data show that roughly one in ten U.S. mortgages are now written outside the federal Qualified Mortgage (QM) standard. Griffin Funding’s analysis of HMDA loan‑level data estimates non‑QM originations reached $239 billion in 2025, about 10% of total mortgage volume by dollar value. A separate report from Optimal Blue confirms the trend, noting non‑QM loans made up more than 10% of monthly rate‑lock volume in July 2026.
Why the shift matters for families
The growth follows a 2021 rule change by the Consumer Financial Protection Bureau (CFPB) that eliminated Appendix Q, the rigid income‑documentation requirement that once governed QM loans. While the new rule still allows lenders to verify income using guidelines from Fannie Mae, Freddie Mac, FHA, VA and USDA, it does not change the way self‑employment income is calculated. Lenders continue to base qualifying income on post‑deduction figures from tax returns, which can dramatically reduce the reported earnings of business owners who claim legitimate write‑offs.
About 16.5 million Americans are self‑employed, including real‑estate investors, gig workers, retirees and others whose income streams do not fit neatly into the traditional W‑2 model. Many of these borrowers are turning to private‑market documentation programs—often called bank‑statement loans—to demonstrate cash flow through business deposits rather than tax returns. These programs typically require 12 to 24 months of bank statements and can qualify borrowers who would otherwise be excluded from QM loans.
Real‑world examples
Griffin Funding cites a Florida business owner who, despite aggressive tax write‑offs, documented sufficient cash flow from business deposits to secure a cash‑out refinance on his primary residence. In Massachusetts, a self‑employed professional qualified for a loan only after deposits in a client‑trust account were explained as legitimate income. Both borrowers had solid credit; their obstacle was paperwork, not repayment ability.
Investor‑focused borrowers are also using non‑QM products. A Michigan medical‑practice owner purchased a rental property with a debt‑service‑coverage‑ratio (DSCR) loan that bases qualification on the property’s rental income rather than personal earnings, allowing the transaction to close through an LLC.
Impact on the broader market
Despite the shift toward non‑QM products, borrower quality remains strong. In July 2026, average credit scores for all locked‑in mortgages—including conforming loans—were around 730, and debt‑to‑income ratios were lower than a year earlier. The change reflects a broader move away from the narrow QM box rather than a deterioration in creditworthiness.
Bank‑statement loans accounted for 30.6% of non‑QM volume, while investor and DSCR loans made up 33.5%. The remaining 35.9% consisted of interest‑only structures, higher‑priced loans and other expanded‑guideline products.
Legislative background
The Self‑Employed Mortgage Access Act, introduced in 2018 by Sens. Mark Warner (D‑VA) and Mike Rounds (R‑SD), sought to replace Appendix Q with a more flexible income‑verification framework. Although the bill never passed, the CFPB’s March 2021 final rule incorporated many of its provisions, removing the 43% debt‑to‑income ceiling and allowing the use of existing agency guidelines.
Since then, no new federal legislation has been introduced to further address the documentation gap. A review of Congress.gov shows no active bills targeting the QM standard as of August 2026.
What this means for homeowners and lenders
For families seeking homeownership, the expansion of non‑QM options provides an additional pathway to financing, especially for those whose income is derived from businesses, rentals or other non‑traditional sources. Lenders, meanwhile, are adapting their underwriting models to capture this growing segment while maintaining overall credit standards.
While the removal of Appendix Q was intended to simplify the process, the underlying arithmetic for self‑employment income has not changed. As a result, non‑QM products continue to fill the gap, ensuring that a broader cross‑section of American families can access mortgage credit without compromising the integrity of the lending system.
Original reporting: KRDO (Colorado Springs metro) — read the source article.
