Houston Non-Qualified Mortgage Lender
What You Need to Know: Houston Non-QM Loans
A Non-Qualified Mortgage is a flexible mortgage that doesn't require traditional W-2 income verification. Instead of relying on tax returns, lenders evaluate your financial health through bank statements, assets, or property cash flow. These loans are ideal for self-employed professionals, real estate investors, and individuals with non-traditional income who don't meet conventional lending guidelines. While Non-QM loans are not traditional loans and don't meet standard qualified mortgage rules, they still comply with the ability-to-repay rule set by the CFPB and offer greater flexibility for income verification and borrower types.
Our Houston Non-QM loan programs accept credit scores from 620 to 700, depending on the program type. DSCR loans for investment properties require a minimum credit score of 660. Bank statement loans need a minimum credit score of 640, the 1099 program requires a minimum credit score of 620, and P&L loans and asset qualifier programs both require a minimum credit score of 700. Down payments range from 10% to 30% based on the loan program and property type, with loan amounts available from $100,000 to $3,000,000. Most loans close in 30 to 45 days, with some programs closing faster.
Flagstone Financial is a direct lender with no call centers. You work directly with Darren Smith, who holds a CPA and an MBA in Finance. Over 95% of our business comes from repeat clients and referrals, a testament to our personalized service and local Houston expertise across all neighborhoods from River Oaks to The Woodlands. We understand Houston's unique economic factors, including energy sector fluctuations, flood zone requirements, and the impact of PIDs and MUDs on financing.
How Non-Qualified Mortgages Work in Houston
While traditional mortgages are limited by rigid documentation requirements, Non-Qualified Mortgages offer flexibility through alternative qualification methods. Borrowers can qualify using 12 to 24-month bank statements that replace tax returns, asset-based documentation that uses investments or savings as proof of income, DSCR loans where real estate investors qualify based on rental income rather than personal income, 1099 earnings for freelancers and independent contractors, or profit and loss statements for business owners with strong profitability.
These programs make it easier for borrowers with irregular income or complex finances to secure a home or investment property in the Houston real estate market. Non-QM loans are ideal for professionals in Houston's diverse economy, including contractors, small business owners, and investors expanding their portfolios. They allow you to demonstrate financial strength using alternative documentation while still meeting regulatory requirements.
Who Benefits from Non-QM Mortgages in Houston
Self-employed professionals and business owners represent the primary audience for many Non-QM programs. Houston's thriving entrepreneurial community includes medical practice owners throughout the Houston Medical Center and Memorial Hermann areas, restaurant and hospitality owners in Montrose and Heights, oil and gas consultants and contractors, real estate agents and brokers, technology entrepreneurs, construction company owners, retail business operators, attorneys and CPAs in private practice, and financial consultants. All benefit from flexible income verification using bank statements or profit and loss (P&L) statements instead of traditional tax returns.
Real estate investors use DSCR loans and investment property loans extensively in Houston's strong rental market. Single-family rental investors in Heights, Oak Forest, and Garden Oaks, multi-property portfolio owners, fix-and-flip investors in emerging neighborhoods, short-term rental operators in downtown and Galleria areas, out-of-state investors seeking Houston opportunities, and developers all utilize Non-QM financing to build their portfolios while maintaining liquidity and flexibility.
High-net-worth individuals, including retirees with substantial 401(k)s, IRAs, or investment portfolios but limited W-2 income, executives with stock options and equity compensation, and those preserving liquidity while accessing favorable financing, all benefit from asset qualifier programs. Complex income situations, including professionals with commissioned sales positions, multi-stream income sources, bonus-heavy compensation common in Houston's energy sector, and 1099 independent contractors, all face challenges with conventional lending that Non-QM solves.
Borrowers recovering from credit events find Non-QM loans invaluable. Those recovering from bankruptcy need only a 2-year waiting period, whereas conventional post-foreclosure situations require 4 to 7 years. Short sale survivors also need a 2-year seasoning period, and divorce situations affecting credit have Non-QM options available. This is particularly valuable for Houston borrowers who experienced financial hardship during economic downturns or the aftermath of Hurricane Harvey.
International buyers, including foreign nationals investing in Houston real estate, ITIN holders without Social Security numbers, non-permanent residents with valid visas, and international professionals relocating to Houston, all have specialized programs designed for their unique circumstances.
The Houston Non-QM Loan Process
Houston Non-QM Loan Programs and Requirements
DSCR Loans: Investment Property Financing
Our most popular program allows you to qualify based entirely on rental income with no personal income verification required. Perfect for Houston real estate investors in Heights, Midtown, Sugar Land, Pearland, and throughout Harris County. These loans require a minimum credit score of 660 with up to 85% LTV and loan amounts ranging from $100,000 to $3,000,000. There is no limit on the number of properties you can finance. LLC ownership is allowed, and short-term rentals, such as Airbnb and VRBO, are accepted. Interest-only options are available, and even vacant properties are eligible for consideration. We can work with DSCR ratios below 1.0, and foreign national investors are welcome.
This program works for single-family rentals, luxury condos, multi-unit properties, fix-and-flip projects, and Airbnb properties throughout the Houston real estate market. The loan approval is determined by the property's Debt Service Coverage Ratio rather than personal employment or income, making it ideal for building investment portfolios without the constraints of conventional lending.
Bank Statement Loans: Self-Employed Solutions
Qualify using 12 or 24 months of bank statements instead of tax returns. Ideal for Houston's entrepreneurs, medical practice owners, restaurant owners, oil and gas consultants, real estate agents, and small business owners. These loans require a minimum credit score of 640 with up to 90% LTV and loan amounts ranging from $150,000 to $3,000,000. We typically apply a 50% expense factor on deposits, and 30-year fixed rates are available with interest-only options for both primary residence and investment properties.
This solution is perfect for Houston professionals in the Medical Center area, Montrose business district, Energy Corridor, and throughout the Houston metro who have strong income but complex tax returns. Self-employed individuals and small business owners who prefer using bank deposits to prove income instead of tax returns find this program invaluable for securing financing.
1099 Mortgage Loans: Independent Contractors
Use your 1099 earnings statements to qualify without tax returns. Designed for Houston's growing gig economy, including energy consultants, traveling nurses, IT professionals, engineering contractors, realtors, and gig workers who receive 1099 forms. These loans require a minimum credit score of 620 with up to 90% LTV and loan amounts ranging from $150,000 to $3,000,000. We verify year-to-date earnings from a single employer, and interest-only options are available. You can qualify without submitting full tax returns, making this process ideal for independent contractors who want to streamline their qualification.
Asset Qualifier Loans: Retirement and High Net Worth
Qualify based solely on liquid assets with no income or employment verification. Ideal for retirees, executives with stock compensation, trust fund beneficiaries, and high-net-worth individuals seeking to preserve liquidity while accessing favorable financing. These loans require a minimum 700 credit score with 75% maximum LTV and loan amounts from $250,000 to $3,000,000. You must have $500,000 in post-closing reserves, and all assets must have been seasoned for at least 6 months. Income verification is replaced by proof of liquid assets and reserves, allowing borrowers with significant assets but non-traditional income sources to qualify easily.
Profit and Loss Loans: Business Owners
Use your business P&L statements instead of personal tax returns. Streamlined qualification for established Houston business owners with strong profitability. These loans require 700 minimum credit score with 75% maximum LTV and loan amounts from $150,000 to $3,000,000. We accept 1 or 2-year P&L statements for primary residence only, and no DTI calculations are required. This program is designed for borrowers with significant business income who prefer not to submit complete tax documentation.
ITIN Loans: Non-Citizens
Full documentation mortgages for Houston residents without Social Security numbers. Serving Houston's diverse international communities from Chinatown to the Mahatma Gandhi District. These loans require 640 minimum credit score with 75% maximum LTV and loan amounts from $125,000 to $2,500,000. We accept up to 50% DTI for primary residence only, allowing non-U.S. citizens or residents without Social Security numbers to purchase property in Texas.
Foreign National Loans: International Investors
Non-U.S. citizens can invest in Houston real estate without a U.S. credit history. Qualify based solely on property rental income. These loans require no U.S. credit with a 70% maximum LTV and loan amounts from $100,000 to $1,500,000. The property must maintain a DSCR of at least 1.1, you must reside outside the U.S., and a valid visa is required. This program offers Houston real estate investment opportunities to international buyers seeking to diversify their portfolios.
Frequently Asked Questions About Non-QM Loans
What are the Non-QM loan requirements in Houston?
Lenders typically review alternative income documents, such as bank statements or asset records. Minimum credit scores range from 620 to 700, depending on the program. Down payments range from 10% to 30%, depending on the program and property type. Each program has specific requirements for documentation, reserves, and property eligibility that we'll explain during your consultation.
What does a Non-QM loan mean?
A Non-QM loan or Non-Qualified Mortgage is a flexible mortgage that doesn't meet standard qualified mortgage rules established by the Consumer Financial Protection Bureau. It offers greater flexibility for income verification, borrower type, and qualification criteria while still meeting ability-to-repay requirements. The term non-qualified refers to the loan not meeting standard QM rules, not to the borrower being unqualified.
Is a Non-QM loan a conventional loan?
No. A Non-QM loan is considered an alternative mortgage and does not meet standard qualified mortgage rules. It offers greater flexibility for income verification and borrower types than conventional conforming loans. Conventional loans must adhere to strict guidelines established by Fannie Mae and Freddie Mac. In contrast, Non-QM loans offer more flexible underwriting tailored to borrowers with non-traditional income or credit situations.
Can real estate investors use Non-QM loans in Houston?
Yes. Many Houston real estate investors use DSCR loans and investment property loans to purchase or refinance rental properties based on cash flow rather than personal income. This is ideal for building portfolios without the constraints of conventional lending, which requires personal income verification and limits the number of financed properties.
How do Non-QM loan rates compare to conventional mortgages in Houston?
Non-QM loan rates are typically 0.5% to 2% higher than conventional conforming mortgage rates due to their flexible underwriting standards and alternative documentation requirements. However, for borrowers who cannot qualify conventionally, Non-QM loans provide access to financing that would otherwise be unavailable. The value of obtaining financing often far outweighs the slightly higher interest rate, especially for investment properties that generate positive cash flow.
Do I need perfect credit for a Houston Non-QM loan?
No. While credit scores are considered, Non-QM loans accommodate lower credit scores than conventional mortgages. Minimum scores range from 620 to 700, depending on the specific program. For investment property DSCR loans, the property's cash flow is more important than credit score. We evaluate your complete financial picture, including assets, income stability, and down payment, rather than just credit scores.
Houston Neighborhoods and Communities We Serve
Flagstone Financial has financed properties throughout Greater Houston's diverse neighborhoods with extensive experience across every central area. We serve Katy, with its master-planned communities and strong school districts; Rosenberg, featuring growing development and investment opportunities; and Sugar Land, which boasts planned communities and luxury homes. Cypress offers new construction and family communities with excellent growth potential. Bellaire provides an established community with redevelopment opportunities near the inner loop.
Katy
Rosenberg
Sugar Land
Cypress
Bellaire
Friendswood
Houston Heights
The Woodlands
League City
Humble