Non-QM Mortgage Guide: California 2026
Complete guide to Non-QM mortgages in California. Compare DSCR, bank statement, asset depletion, and 1099 loan programs from 150+ licensed lenders.
NonQM Lending Team
Expert Contributor
The Complete Non-QM Mortgage Guide for California Borrowers: 2026
Non-QM (Non-Qualified Mortgage) loans have transformed how California borrowers access homeownership and investment financing. If traditional lenders have turned you down because of self-employment income, credit history, or unconventional financial circumstances, Non-QM programs provide proven alternatives backed by 150+ licensed lenders across California.
This guide covers every Non-QM loan type available in California, who qualifies, current rates, and how to choose the right program for your situation.
What Are Non-QM Loans?
Non-QM loans are mortgage products that do not meet the Consumer Financial Protection Bureau's (CFPB) Qualified Mortgage standards. This does not mean they are risky or subprime. It means they use alternative methods to verify a borrower's ability to repay, such as bank statements, asset documentation, or property cash flow instead of traditional W-2 income and tax returns.
Non-QM Loan Programs Available in California
1. Bank Statement Loans **Best for**: Self-employed borrowers, business owners, freelancers
Use 12 or 24 months of bank statements to qualify instead of tax returns. Ideal for California's large self-employed workforce in tech, entertainment, and agriculture.
- Credit score: 620+ minimum
- Down payment: 10-25%
- Loan amounts: Up to $3M+
- [Learn more about bank statement loans](/programs/bank-statement)
2. DSCR Loans (Investor Cash Flow) **Best for**: Real estate investors, landlords, property portfolio builders
Qualify based on the rental property's income, not your personal income. No employment verification, no tax returns, no W-2s.
- DSCR ratio: 1.0-1.25 minimum
- Down payment: 20-25%
- Property types: SFR, 2-4 units, condos
- [Learn more about DSCR loans](/programs/dscr)
3. Asset Depletion Loans **Best for**: Retirees, high-net-worth individuals, those with significant savings
Qualify using liquid assets (stocks, bonds, retirement accounts, savings) divided over the loan term to create a qualifying income stream.
- Minimum assets: Typically $500,000+
- Down payment: 20-30%
- Loan amounts: Up to $5M+
- [Learn more about asset depletion loans](/programs/asset-depletion)
4. 1099 Income Loans **Best for**: Independent contractors, freelancers, gig economy workers
Use your 1099 tax forms to qualify instead of full tax returns. Simpler documentation for borrowers with consistent contract income.
- 1-2 years of 1099s required
- Credit score: 660+ minimum
- Down payment: 10-20%
5. Foreign National Loans **Best for**: Non-US citizens investing in California real estate
Available for foreign nationals and non-permanent residents purchasing investment or vacation properties in California.
- No US credit history required
- Down payment: 25-30%
- Loan amounts: $100K-$3M
6. Recent Credit Event Loans **Best for**: Borrowers recovering from bankruptcy, foreclosure, or short sale
Programs with shorter seasoning periods (as little as 1 day from discharge) for borrowers rebuilding their credit.
- Credit score: 620+ minimum
- Down payment: 20-30%
- Compensating factors may be required
California Non-QM Loan Comparison
| Program | Min Credit | Down Payment | Income Proof | Best For |
|---|---|---|---|---|
| Bank Statement | 620 | 10-25% | Bank deposits | Self-employed |
| DSCR | 620 | 20-25% | Property rent | Investors |
| Asset Depletion | 680 | 20-30% | Liquid assets | Retirees/HNW |
| 1099 Income | 660 | 10-20% | 1099 forms | Contractors |
| Foreign National | None | 25-30% | Foreign docs | Non-US buyers |
| Recent Credit Event | 620 | 20-30% | Varies | Credit recovery |
California Non-QM Market Overview
California is the largest Non-QM market in the nation with high property values and a massive self-employed workforce. Key market statistics:
- Median home price: $793,000
- Licensed Non-QM lenders: 150+
- Most popular programs: DSCR and bank statement loans
- Average rental yield: Strong across Los Angeles, San Diego, Sacramento
Case Study: San Francisco Non-QM Success Story
- Borrower Profile:
- Location: San Francisco, CA
- Loan Amount: $1,200,000
- Program: Asset Depletion
- Situation: $3.2 million in liquid assets
- Result: Approved and closed within 30 days
Traditional lenders declined this borrower because their income documentation did not fit conventional underwriting guidelines. The Non-QM program recognized their true financial strength and provided the financing they needed.
How to Choose the Right Non-QM Program in California
Follow these steps to find the best Non-QM loan for your situation:
- Identify your income type — W-2, self-employed, investment income, or assets
- Check your credit score — This determines which programs are available and at what rates
- Calculate your down payment — More down payment means better rates and more options
- Determine the property type — Primary residence, investment, or vacation home
- Compare at least 3 lenders — Rates and terms vary significantly between lenders
- Get pre-qualified — A pre-qualification letter strengthens your offer
California Non-QM Rates: What to Expect in 2026
Non-QM rates in California typically run 0.50-2.00% higher than conventional rates, depending on the program and borrower profile. Current ranges:
| Program | Rate Range | Factors Affecting Rate |
|---|---|---|
| Bank Statement | 7.25-9.50% | Credit score, LTV, statement period |
| DSCR | 7.25-9.50% | DSCR ratio, credit score, LTV |
| Asset Depletion | 7.00-8.50% | Asset amount, LTV, credit score |
| 1099 Income | 7.50-9.00% | Income stability, credit score |
| Foreign National | 8.00-10.00% | Down payment, property type |
Getting Started with Non-QM Loans in California
Our network connects you with 150+ licensed Non-QM lenders across California. Get matched with lenders who specialize in your specific situation.
[Get Pre-Qualified](/get-started) | [Find California Lenders](/locations/california) | [Compare All Programs](/programs)
Frequently Asked Questions
Are Non-QM loans safe in California? Yes. Non-QM loans in California are fully regulated mortgage products offered by licensed lenders. They follow all federal and state lending laws, including the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA). The term "Non-QM" simply means they use alternative income verification methods rather than the standard W-2/tax return approach.
What is the minimum credit score for Non-QM loans in California? Most Non-QM programs in California require a minimum credit score of 620-660. Asset depletion loans may require 680+. The higher your credit score, the better your rate and terms. Borrowers with 740+ scores typically receive the best available Non-QM rates, often within 0.50-0.75% of conventional rates.
How long does it take to close a Non-QM loan in California? Non-QM loans in California typically close in 21-35 days, comparable to conventional loans. DSCR loans often close faster (21-25 days) because they require less documentation. Bank statement and asset depletion loans may take slightly longer (25-35 days) due to the income calculation process.
Can I get a Non-QM loan for a primary residence in California? Yes. While DSCR loans are limited to investment properties, most other Non-QM programs (bank statement, asset depletion, 1099, recent credit event) are available for primary residences, second homes, and investment properties in California.
Do Non-QM loans have prepayment penalties in California? Some Non-QM loans in California include prepayment penalties, typically for the first 1-3 years. Investment property DSCR loans commonly have a 3-year prepayment penalty. Primary residence Non-QM loans may or may not have prepayment penalties depending on the lender and program. Always confirm the prepayment terms before closing.
How do Non-QM rates compare to conventional rates in California? Non-QM rates in California are typically 0.50-2.00% higher than conventional mortgage rates. The exact premium depends on the program type, credit score, LTV, and property type. Borrowers with strong credit (740+) and significant down payments (25%+) can often secure Non-QM rates within 0.50-0.75% of conventional rates.
Can I refinance from a Non-QM loan to a conventional loan later? Yes. Many California borrowers use Non-QM loans as a bridge to conventional financing. Once your income documentation, credit score, or financial situation improves, you can refinance into a conventional loan with potentially lower rates. There is no restriction on refinancing from Non-QM to conventional.
Explore California Non-QM Resources
California Location Hub
Visit our [California Non-QM Lending page](/locations/california) for a comprehensive overview of Non-QM mortgage options across the state, including lender directories, market statistics, and program comparisons.
California City Guides
Explore Non-QM lending options in specific California markets:
- [Los Angeles Non-QM Lenders](/locations/california/los-angeles) — Local lender directory, market data, and neighborhood insights
- [San Diego Non-QM Lenders](/locations/california/san-diego) — Local lender directory, market data, and neighborhood insights
- [San Francisco Non-QM Lenders](/locations/california/san-francisco) — Local lender directory, market data, and neighborhood insights
Related California Articles
- [Best DSCR Lenders in California 2026](/blog/best-dscr-lenders-california-2026)
- [Bank Statement Loans in California 2026](/blog/bank-statement-loans-california-2026)
Loan Program Details
- [All Non-QM Loan Programs](/programs) — Browse all available programs
- [Non-QM vs Conventional Loans](/blog/non-qm-vs-conventional-loans) — Side-by-side comparison
- [Get Pre-Approved](/get-started) — Start your application today