Non-QM Loans in Tennessee: Qualify on Bank Statements, 1099s or Assets
For self-employed buyers, 1099 earners, investors and others whose tax returns don’t show what they really earn.
If your tax returns show less income than you actually have, usually because of write-offs, a conventional lender may not approve the loan you can afford. Non-QM lenders can qualify you on bank statements, 1099s, a CPA-prepared P&L or your assets instead.
Non-QM usually costs more than a conventional loan, so I check first whether your returns already work. If they don’t, I compare how each non-QM lender would read your file.
Recent file: an investor bought through their LLC without traditional income documentation and closed three weeks after applying.
“RL was very knowledgeable and extremely communicative throughout the entirety of the loan process. He was able to keep the ball rolling and allowed us to get to closing more quickly than we had anticipated. I was also extremely satisfied with the mortgage rate I was able to qualify for on my out-of-the-box loan. I highly recommend.”
Brent B.
Franklin, TN
Who Non-QM Loans Are Best For
Non-QM fits borrowers with real income or assets who don’t fit conventional documentation rules.
Is a Non-QM Loan Right for You?
Non-QM usually makes sense when your income is real but your tax returns understate it, or when you’re qualifying on assets or rent.
Lenders read self-employed income very differently, so it helps to know how lenders evaluate self-employed income before you apply.
Are self-employed or business owners
Have variable income, bonuses, commissions, or distributions
Use K-1s, S-Corp income, or have multiple entities
Prefer cash-flow based or asset-based qualification
Want financing that reflects real income, not just tax returns
Non-QM Loans in Tennessee: The Main Programs
Non-QM lenders qualify you on documents that conventional guidelines don’t accept. These are the main programs and what each one asks for.
- Bank statement: 12 or 24 months of personal or business bank statements in place of tax returns.
- 1099: one or two years of 1099s for independent contractors.
- Profit and loss: a P&L statement, usually prepared or signed by a CPA or tax preparer.
- Asset-based: qualifying on savings and investments instead of income, common for retirees and people between businesses.
- DSCR: for rentals, qualifying on the property’s rent. See Tennessee DSCR & Investor Loans.
When Non-QM Makes Sense
Non-QM usually costs more than a conventional loan, so it should solve a real documentation problem, not be the default. If your tax returns already show the income, a conventional loan is usually the better deal. Some borrowers use non-QM to buy now and refinance into a conventional loan once their returns catch up, though that is never guaranteed.
Comparing Non-QM Lenders
Non-QM guidelines differ more from lender to lender than any other loan type: how deposits are counted, which expense factor is applied to business statements, how many months of reserves are required. That is where having more than 30 lenders to compare matters.
The Same Bank Statements, Three Different Incomes
Here is how that plays out, with round numbers for illustration (not a real file). A business owner brings 12 months of business bank statements. The lender counts the eligible deposits, then subtracts an expense factor to arrive at income.
| Illustration: 12 months of business bank statements | Per year | Per month |
|---|---|---|
| Business deposits | $420,000 | |
| Less deposits that aren’t income (transfers from the owner’s personal account, an equipment-loan deposit) | −$35,000 | |
| Eligible deposits | $385,000 | |
| Qualifying income at a 15% expense factor | $327,250 | about $27,300 |
| Qualifying income at a 50% expense factor | $192,500 | about $16,000 |
| Income on the tax returns, after write-offs | $96,000 | $8,000 |
Expense factors vary by lender and by business type: commonly about 15% to 50% for service businesses (lower with no employees) and up to about 80% for businesses that sell products. At some lenders, a third-party expense letter or a P&L can support a lower factor, and statements from a personal account usually count 100% of eligible deposits. That is why I compare how each lender would read your statements before you apply. Ranges reviewed October 2026; lender guidelines change.
From a Recent File
In late March 2025, a buyer in Knoxville found me through an online search. They wanted an investment property and didn’t realize they could buy it through their LLC without traditional income documentation. A non-QM investor loan let them do exactly that. I had the pre-approval out and the file in underwriting the following Monday, and the loan closed on April 17, the scheduled closing date, three weeks after the application came in.
Common Questions About Non-QM Loans
A loan that falls outside the federal Qualified Mortgage rules, usually because it’s documented differently. Instead of tax returns, the lender may use bank statements, 1099s, a profit and loss statement or your assets.
Non-QM loans are commonly used by self-employed borrowers, business owners, commission-based earners, or anyone whose tax returns don’t fully reflect their cash flow.
Depending on the program, Non-QM loans may use bank statements, asset depletion, profit-and-loss statements, or other alternative income documentation.
They’re underwritten differently, not loosely: the lender still has to verify you can repay. They usually cost more than a conventional loan, which is why I check first whether your returns already qualify you.
Usually 12 or 24 months, personal or business, depending on the program. Some programs use a CPA-prepared profit and loss statement instead.
No. It also covers 1099 earners, investors qualifying on rental income, borrowers using assets instead of income, and some recent credit events that conventional guidelines won’t accept yet.
Often, once your income documentation or credit fits conventional guidelines. Check for a prepayment penalty first; some non-QM loans, especially investor loans, have one.
Related reading: DSCR Loans Explained · What Really Affects Mortgage Rates (and What Doesn’t)
How I Approach Non-QM Loans
Four things I do on every non-QM file.
Conventional First, If Your Returns Work
Non-QM usually costs more, so I start by checking whether your tax returns already qualify you for a conventional loan. If they do, that’s the better deal.
If they don’t, I work out which documentation path shows your income best.
How Each Lender Reads Your Statements
Expense factors, how deposits are counted and reserve rules differ more by lender here than on any other loan. Before you apply, I compare how lenders across my network of more than 30 would read your file.
Statements Organized Before Underwriting Asks
Non-QM files slow down when a large deposit or a transfer isn’t explained. I go through your statements first and get the explanations ready.
Every complete application gets a same-day review.
One Person, Seven Days a Week
You work with me from the first call until your loan closes. No call center, no handoffs.
Calls and texts returned the same day, 7 days a week.
Not Sure if a Non-QM Loan Is the Right Fit?
Send me how you’re paid and what your last two tax returns show, and I’ll tell you whether conventional works or which non-QM path fits. It takes one call, and there’s no credit pull to start.
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