What we verified in “Non-QM and bank statement loans: what they are”

Statements and where we checked them

The statements with rules, figures or dates, with the exact place in the source and the date we checked them.

1. According to the CFPB, the ability-to-repay rule prohibits most lenders from giving you a mortgage unless they have made a reasonable and good faith determination that you are able to pay it back; lenders must generally find out, consider and document your income, assets, employment, credit history and monthly expenses; they cannot just use an introductory or teaser rate, and if the rate goes up later they must consider whether you can pay the higher rate too; and one way to follow the rule is by making a Qualified Mortgage.

   Sources 1 · What is the ability-to-repay rule? (last reviewed Apr 03, 2024): 'prohibits most lenders from giving you a mortgage unless they have made a reasonable and good faith determination that you are able to pay back the loan'; 'find out, consider, and document a borrower's income, assets, employment, credit history, and monthly expenses'; 'Lenders cannot just use an introductory or'; 'the lender has to make a reasonable effort to figure out if the borrower can pay the higher interest rate too'; 'One way a lender can follow the ability-to-repay rule is by making a' · Checked October 17, 2026

2. Under Regulation Z, a lender may not make a covered loan unless it makes a reasonable and good faith determination, at or before closing, that you will have a reasonable ability to repay it according to its terms; and it must consider eight things: your current or reasonably expected income or assets (other than the home's value), your employment status if it relies on that income, the monthly payment on the loan, the payment on any simultaneous loan, mortgage-related obligations, your current debts, alimony and child support, your debt-to-income ratio or residual income, and your credit history.

   Sources 2 · 12 CFR §1026.43(c)(1): 'A creditor shall not make a loan that is a covered transaction unless the creditor makes a reasonable and good faith determination at or before consummation that the consumer will have a reasonable ability to repay the loan according to its terms'; (c)(2)(i)-(viii): 'The consumer's current or reasonably expected income or assets'; 'the consumer's current employment status'; 'The consumer's monthly payment on the covered transaction'; 'any simultaneous loan'; 'mortgage-related obligations'; 'The consumer's current debt obligations, alimony, and child support'; 'debt-to-income ratio or residual income'; 'The consumer's credit history' · Checked October 17, 2026

3. Under Regulation Z, the lender must verify the income or assets it relies on using third-party records that provide reasonably reliable evidence; it may use an IRS tax-return transcript, and examples of other records include copies of the tax returns you filed, W-2s, financial institution records, receipts from check cashing services and receipts from funds transfer services.

   Sources 2 · 12 CFR §1026.43(c)(4): 'using third-party records that provide reasonably reliable evidence of the consumer's income or assets'; 'a tax-return transcript issued by the Internal Revenue Service (IRS)'; 'Copies of tax returns the consumer filed with the IRS or a State taxing authority'; 'Financial institution records'; 'Receipts from the consumer's use of check cashing services'; 'Receipts from the consumer's use of a funds transfer service' · Checked October 17, 2026

4. Under Regulation Z, the ability-to-repay rule applies to any consumer credit transaction secured by a dwelling, except a home equity line of credit (HELOC) and a loan secured by a timeshare interest; and the repayment-ability requirements do not apply to, among others, a reverse mortgage or a bridge loan of 12 months or less.

   Sources 2 · 12 CFR §1026.43(a): 'This section applies to any consumer credit transaction that is secured by a dwelling'; 'A home equity line of credit subject to § 1026.40'; 'A mortgage transaction secured by a consumer's interest in a timeshare plan'; (a)(3): 'A reverse mortgage subject to § 1026.33'; 'bridge'; 'with a term of 12 months or less' · Checked October 17, 2026

5. According to the CFPB, a Qualified Mortgage is a loan with less risky features and protections that make it more likely you can afford it; all government-backed loans (HUD/FHA, USDA and VA) are qualified, while all others, including conventional loans backed by Fannie Mae and Freddie Mac and jumbo loans, must meet special requirements; if your loan is a Qualified Mortgage, it is assumed that the lender followed the ability-to-repay rule; generally it cannot have an interest-only period, negative amortization or balloon payments (except under certain conditions for small lenders), or a term longer than 30 years; the APR on most cannot exceed a threshold; it has a limit on upfront points and fees; and the lender must consider and verify your income or assets and debts and consider your debt-to-income ratio or residual income.

   Sources 3 · What is a Qualified Mortgage? (last reviewed Jan 02, 2025): 'a loan with less risky features and protections that make it more likely that you'll be able to afford your loan'; 'Types of qualified loans include all government-backed loans'; 'and jumbo loans must meet special requirements to be considered qualified loans'; 'it's assumed that the lender followed the ability-to-repay rule'; 'Negative amortization'; 'Balloon payments'; 'balloon payments are allowed under certain conditions for loans made by small lenders'; 'Loan terms that are longer than 30 years'; 'The annual percentage rate, or APR, on most qualified mortgages cannot be higher than a particular threshold'; 'A limit on upfront points and fees'; 'A requirement to consider and verify income or assets and debts'; 'known as your residual income' · Checked October 17, 2026

6. Under Regulation Z, a general qualified mortgage has regular, substantially equal periodic payments that do not increase the principal balance, let you defer principal or end in a balloon payment; its term does not exceed 30 years; its APR may not exceed the average prime offer rate (APOR) for a comparable loan by 2.25 or more percentage points on a first-lien loan at or above a set amount (with higher margins for smaller loans); and its points and fees may not exceed 3 percent of the loan for loan amounts of $100,000 or more, amounts that are adjusted every year for inflation.

   Sources 2 · 12 CFR §1026.43(e)(2)(i): 'regular periodic payments that are substantially equal'; 'Result in an increase of the principal balance'; 'Allow the consumer to defer repayment of principal'; 'Result in a balloon payment'; (e)(2)(ii): 'For which the loan term does not exceed 30 years'; (e)(2)(vi): 'does not exceed the average prime offer rate for a comparable transaction'; '2.25 or more percentage points'; (e)(3)(i)(A): 'For a loan amount greater than or equal to $100,000 (indexed for inflation): 3 percent of the total loan amount'; (e)(3)(ii): 'shall be adjusted annually on January 1' · Checked October 17, 2026

7. According to the CFPB, the mortgage rules only stop a lender from making a loan when the borrower does not have the ability to repay; some lenders choose to comply by making only Qualified Mortgages, which cap upfront points and fees; only Qualified Mortgages have that cap; and lenders are not required to make Qualified Mortgages, so they can charge higher points and fees if they choose.

   Sources 4 · My lender says it can't lend to me because of a limit on points and fees on loans. Is this true? (last reviewed Feb 02, 2024): 'The mortgage rules only stop a lender from making a loan when the borrower does not have the ability to repay the loan'; 'some lenders may choose to comply with the ability-to-repay rule by making only'; 'only Qualified Mortgages have a limit on points and fees'; 'Lenders are not required to make Qualified Mortgages, so they can charge higher points and fees if they choose' · Checked October 17, 2026

8. Under Regulation Z, a covered loan must not include a prepayment penalty unless the penalty is otherwise permitted by law and the loan has an APR that cannot increase, is a qualified mortgage and is not a higher-priced mortgage loan; even then, the penalty cannot apply after three years from closing or exceed 2 percent of the balance prepaid in the first two years or 1 percent in the third.

   Sources 2 · 12 CFR §1026.43(g)(1): 'A covered transaction must not include a prepayment penalty unless'; 'Has an annual percentage rate that cannot increase after consummation'; 'Is a qualified mortgage'; 'Is not a higher-priced mortgage loan'; (g)(2): 'Must not apply after the three-year period following consummation'; '2 percent, if incurred during the first two years following consummation'; '1 percent, if incurred during the third year following consummation' · Checked October 17, 2026

9. According to the CFPB, a few types of lenders and programs may not have to follow the ability-to-repay rule, including Community Development Financial Institutions (CDFIs) certified by the Treasury Department, certain community housing development organizations and down payment assistance providers that receive HUD funding, nonprofits that lend fewer than 200 times a year only to low- or moderate-income consumers (which must follow their own written procedures to determine ability to repay) and state Housing Finance Agencies (HFAs).

   Sources 5 · My mortgage lender told me it was exempt from the ability-to-repay mortgage rule. Is this true? (last reviewed Apr 03, 2024): 'A few special types of lenders are exempt from the ability-to-repay rule'; 'Community Development Financial Institutions'; 'certified by the U.S. Department of the Treasury'; 'Community Housing Development Organizations or Downpayment Assistance Providers of Secondary Financing'; 'Nonprofit organizations that lend less than 200 times a year and provide credit only to low- or moderate-income consumers'; 'must follow their own written procedures'; 'Housing Finance Agencies' · Checked October 17, 2026

10. Under Regulation Z, the Loan Estimate has a 'Loan Terms' table that states whether the loan includes a prepayment penalty ('Prepayment Penalty') and a balloon payment ('Balloon Payment'), meaning a payment more than two times a regular payment, and, for the loan amount, interest rate and principal and interest payment, whether they can increase after closing ('Can this amount increase after closing?').

    Sources 6 · 12 CFR §1026.37(b): 'Loan Terms'; (b)(4): 'Prepayment Penalty'; (b)(5): 'Balloon Payment'; 'a payment that is more than two times a regular periodic payment'; (b)(6): 'Can this amount increase after closing?' · Checked October 17, 2026

11. According to the CFPB, the Loan Estimate is a three-page form you receive after applying for a mortgage; the lender must provide it within three business days of receiving your application; and all lenders must use the same standard form.

    Sources 7 · What is a Loan Estimate?: 'a three-page form that you receive after applying for a mortgage'; 'within three business days of receiving your application'; 'All lenders are required to use the same standard Loan Estimate form' · Checked October 17, 2026

12. The CFPB's 'Your home loan toolkit' recommends getting at least three offers in writing.

    Sources 8 · Your home loan toolkit, section 1, p. 9: 'Get at least three offers—in writing' · Checked October 17, 2026

13. For Fannie Mae, the lender may verify a self-employed borrower's employment and income with copies of their signed federal income tax returns (individual and, in some cases, business returns) for the past two years with all applicable schedules, or with IRS-issued transcripts.

    Sources 9 · Selling Guide B3-3.5-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/13/2023), 'Verification of Income': 'copies of their signed federal income tax returns (both individual returns and in some cases, business returns)'; 'for the past two years (with all applicable schedules attached)'; 'IRS-issued transcripts' · Checked October 17, 2026

14. According to the CFPB, if you are self-employed or have irregular or nonwage income you may need additional documentation; requirements vary from lender to lender and depending on your situation; and you should share your situation with loan officers or a housing counselor and ask what documentation you need.

    Sources 10 · Create a loan application packet: 'If you are self-employed or have irregular or nonwage income, you may need additional documentation'; 'Requirements vary from lender to lender and depending on your specific situation'; 'Share your situation when you meet with loan officers or a housing counselor and ask what kind of documentation you need' · Checked October 17, 2026

15. On its conventional loans page, the CFPB describes other non-conforming loans: loans of any size that do not fall into another category; some are intended for borrowers with poor credit, tend to have high rates and may contain risky features, such as minimal documentation of your income, paying only the interest or letting the loan balance grow; some lenders also offer niche programs for borrowers with unusual circumstances, such as self-employed borrowers; and if you are considering a non-conforming loan, it recommends consulting multiple lenders, asking whether you could qualify for a conforming or FHA loan instead and never deciding before getting your official Loan Estimates.

    Sources 11 · Conventional loans (page last modified Oct. 16, 2024), 'Non-conforming (other)': 'Loans of any size that do not fall into another category'; 'Some loans in this category are intended for borrowers with poor credit'; 'These loans tend to have high rates and may contain risky features'; 'Loans that allow for minimal documentation of your income'; 'Loans that allow you to pay only the interest or allow your loan balance to increase'; 'Some lenders also offer niche programs for mainstream borrowers with unusual circumstances'; 'such as self-employed borrowers'; 'If you are considering a non-conforming loan, consult with multiple lenders'; 'Ask if you could qualify for a conforming or FHA loan instead'; 'Never make a final decision about which loan to take before getting your official Loan Estimates' · Checked October 17, 2026

16. HUD-approved housing counselors give independent advice on buying, renting, defaults and credit, often at little or no cost.

    Sources 12 · Find a Housing Counselor: 'Housing counselors throughout the country can provide advice on buying a home, renting, defaults, forbearances, foreclosures, and credit issues'; 'they can offer independent advice, often at little or no cost to you' · Checked October 17, 2026