How to Buy a Vacation Home with a Non-QM Loan 

Have you ever taken a vacation that you wished would last forever? Sometimes a vacation destination sticks with you and inspires you to relive that experience every year by owning a home at that location. If you have ever considered buying a vacation home, you’re not alone. 

Whether it’s a cozy cabin in the mountains or a rental-friendly beach property, the idea of having a getaway spot for yourself or as an investment property can sound appealing, but when it comes time to finance that second home, some buyers find that traditional mortgage options can be a bit too rigid. 

That’s where Non-QM loans come in. These loans are built for unique financial situations, including self-employed borrowers and real estate investors. In this blog post, you will learn the best Non-QM loan products that might help you turn the vacation home of your dreams into a reality. 

What Is a Non-QM Loan? 

Non-QM stands for Non-Qualified Mortgage. These are home loans that don’t follow the same strict guidelines as conventional loans backed by Fannie Mae or Freddie Mac, meaning that they offer more flexibility in how borrowers qualify. 

Non-QM loans are often used by self-employed people who have irregular income or want to use alternative ways to verify their ability to repay the loan. A Non-QM loan might be better if your financial situation doesn’t qualify you for traditional financing. Because Non-QM loans are designed for non-traditional borrowers, they may come with different terms than conventional loans, such as higher interest rates or down payment requirements.

How to Know if a Non-QM Loan Is Right for You 

You may want to consider a Non-QM loan if: 

• You are self-employed or own a business 

• Your income is seasonal, variable, or difficult to document 

• You are buying a property that you plan to rent out 

• You want to use bank statements or assets to qualify 

• You have been turned down for a traditional mortgage 

If any of these scenarios sound like yours, you are not alone. Non-QM loans are designed for buyers like you. 

Why Use a Non-QM Loan for a Vacation Home? 

Buying a second home usually involves more hurdles than buying a primary residence. Many lenders require a higher credit score, a larger down payment, and more documentation, which can be tough to meet for buyers with unique financial situations. 

A Non-QM loan offers more flexibility. You may be able to qualify based on bank statements, rental income from the property, or your assets. These loans may provide a financing path for vacation or investment properties if you do not meet traditional qualification criteria.

Bank Statement Loans for Self-Employed Buyers 

If you own a business or work for yourself, you probably don’t have W-2s or pay stubs to prove your income. A Bank Statement Loan solves that problem. Instead of tax returns, you use 12 or 24 months of bank statements to show your income. 

This option works well if: 

• You are self-employed or run your own business 

• Your tax returns do not reflect your actual earnings 

• You want to buy a vacation home and need a flexible way to qualify 

We work with many clients who fall into this category and have used Bank Statement Loans to purchase their dream getaway. 

DSCR Loans for Real Estate Investors 

If you envision using your vacation home as a short-term rental or investment property, a DSCR loan may be the right fit. DSCR stands for Debt Service Coverage Ratio. It’s a loan that qualifies you based on the income the property can generate, rather than your personal income. 

With a DSCR loan: 

1. You do not need to show personal income or tax returns 

2. Loan eligibility is determined using the property’s rental income 

3. You can often close faster with less documentation 

Many real estate investors use DSCR loans to buy Airbnb- or VRBO-style short-term rental properties. This option is worth exploring if you plan to rent your vacation home. 

ITIN Loans for Foreign National Real Estate Investors 

Buying a vacation home in the United States as a foreign national is possible with the right loan solution. ITIN loans offer a path to property ownership for those without a Social Security number. 

These loans are designed for individuals who live or work in the U.S. and file taxes using an Individual Taxpayer Identification Number (ITIN). Many foreign national investors use this option to finance vacation homes that may also serve as short-term rentals or part-time residences. 

ITIN loans are a strong fit if: 

1. You’re a non-U.S. citizen without a Social Security number 

2. You file U.S. tax returns using an ITIN 

3. You’re investing in a second home or seasonal getaway 

4. You plan to use the property for both personal use and income generation 

While ITIN loans may require a higher down payment or interest rate, they provide a valuable opportunity for international buyers to grow their real estate portfolio and enjoy the benefits of owning property in the United States. 

Not every prospective homeowner will use a conventional loan to finance their next home purchase, and that’s ok! Non-QM loans exist to make homeownership possible for those with unique financial situations. 

Our team of experienced loan officers is here to answer questions, walk you through the process, and connect you with a loan program that works for you. Whether you’re buying a personal retreat, a short-term rental, or a long-term investment, we’re ready to help. 

Get started today by scheduling a free consultation with one of our expert loan officers to learn more about Bank Statement Loans, DSCR loans, ITIN loans, and other Non-QM solutions to find out if they can help you finance your next vacation home.