Non-QM Lending Glossary. The terms, in plain English.

Program details last reviewed: August 23, 2026 · Questions? Call/text 949-738-9770

DSCR (Debt-Service Coverage Ratio)

The property's rental income divided by its full housing payment (principal, interest, taxes, insurance). A DSCR of 1.0 means rent exactly covers the payment. DSCR loans qualify the property on this ratio instead of the borrower's personal income — no tax returns involved.

Non-QM Loan

Any mortgage outside the 'qualified mortgage' box of standard tax-return underwriting — DSCR, P&L-only, bank-statement, and hard money loans are all non-QM. Non-QM does not mean subprime; it means the income is documented differently.

LTV (Loan-to-Value)

The loan amount as a percentage of the property's value. An $800,000 loan on a $1,000,000 property is 80% LTV. Lower LTV = more borrower equity = less lender risk.

CLTV (Combined Loan-to-Value)

All loans on the property combined, divided by its value — the number that matters when adding a HELOC behind an existing first mortgage. Our HELOC goes to 90% CLTV (80% in Texas by state law).

Points

Prepaid interest charged at closing; one point is 1% of the loan amount. Programs trade points for terms — for example, our hard money purchase at 10% down with 700+ FICO carries 3.5 points.

Hard Money Loan

A short-term, asset-based loan underwritten primarily on the property rather than the borrower's finances. Used for flips, bridges, fast closings, and files traditional lenders can't price.

P&L-Only Loan

A self-employed income program where one profit & loss statement (CPA-prepared, or self-prepared options) is the entire income file — no tax returns, no bank statements, no deposit reviews.

Bank-Statement Loan

A non-QM program that derives income from 12–24 months of bank deposits instead of tax returns. A cousin of the P&L-only loan for self-employed borrowers.

HELOC (Home Equity Line of Credit)

A revolving credit line secured against home equity, sitting behind your existing first mortgage. You draw what you need and pay interest on what you use. Ours funds in as little as 5 business days with no appraisal.

HEA (Home Equity Agreement)

Not a loan: an investor pays you cash today in exchange for a share of the home's future value. No monthly payments, no interest; settled when you sell or refinance. Credit accepted from the 500s.

Cash-Out Refinance

Replacing your existing mortgage with a larger one and taking the difference in cash. Resets your first-mortgage rate — which cuts both ways if your current rate is low.

Seasoning

How long you've owned a property (or held a mortgage) before a lender will use its current market value or allow a refinance. Our HELOC carries a 3-month seasoning requirement.

Soft Pull vs. Hard Pull

A soft credit inquiry shows your scores without affecting them — it's how checking your options with us works. A hard pull happens only later, with your permission, at full application.

AVM (Automated Valuation Model)

A data-driven property valuation used instead of a physical appraisal. Replacing the appraisal with an AVM is one reason our HELOC can fund in days instead of weeks.

DTI (Debt-to-Income Ratio)

Monthly debt payments divided by gross monthly income — the number conventional underwriting lives and dies by, and the number DSCR and P&L-only programs deliberately route around.

PMI (Private Mortgage Insurance)

Insurance protecting the lender on conventional loans above 80% LTV. Removable once you build equity — one advantage of conventional over FHA, whose mortgage insurance usually stays for the life of the loan.

IRRRL (VA Interest Rate Reduction Refinance Loan)

The VA 'streamline' refinance — rate reduction only, no cash out. Notably, it remains available in Texas, where VA cash-out refinances are prohibited.

Prepayment Penalty

A fee for paying a loan off early, common on DSCR and other investor loans (and typically negotiable in exchange for rate). Ask how a program's prepay structure fits your exit plan.

Bridge Loan

Short-term financing that 'bridges' to a sale or a long-term refinance — buy now, sell or refinance later. Hard money is the usual vehicle.

Portfolio / Wholesale Lender

A wholesale lender funds loans sourced by brokers; a portfolio lender keeps loans on its own books and can make its own rules. Brokering across 100+ wholesale lenders is how one scenario gets priced many ways.

1031 Exchange

An IRS provision letting investors defer capital-gains tax by rolling sale proceeds into a like-kind property on a strict timeline. DSCR loans are a common financing tool inside 1031 timelines — including reverse exchanges.

STR / LTR (Short-Term / Long-Term Rental)

STR = nightly/weekly rentals (Airbnb, Vrbo); LTR = traditional leases. Our rental programs underwrite both, using market or actual rents.

Owner-Occupied vs. Investment Property

Owner-occupied means you live (or will live) there; investment means it's held for income. The distinction drives program eligibility, minimum down payments (20% on investment purchases), and state rules.

Second Lien / Second Mortgage

Any loan recorded behind your first mortgage — a HELOC is the most common. The first lien gets paid first in a payoff, which is why second-lien terms depend on combined LTV.

Texas Homestead Rule (Art. XVI §50(a)(6))

The Texas constitutional provision capping home-equity lending at 80% combined LTV and imposing a 12-day waiting period. It's also why VA cash-out refinances don't exist in Texas.

Reverse Mortgage / HECM

A loan for homeowners 62+ that converts equity into cash with no monthly mortgage payment; the balance is settled when the home is sold or vacated. Requires substantial equity — roughly 50% or more.

FICO Score

The credit-score model most mortgage lenders use. Program floors at Cap Rate Funding: HELOC 620 (hard), P&L-only 660, conventional 620; hard money purchase terms tier at 700 (10% down + 3.5 points vs. 15% down).

Escrow / Impounds

The account your servicer uses to collect and pay property taxes and insurance alongside your mortgage payment. DSCR underwriting counts taxes and insurance in the coverage ratio.