Mortgage rates ticked higher in July, and the overall lock market felt it — total rate locks fell 11.4% from June as the benchmark 30-year conforming rate climbed to 6.72%, according to Optimal Blue data reported by National Mortgage Professional. Purchase locks slipped 11.6%, and refinance activity pulled back even more sharply.
But one corner of the market didn't just hold steady — it hit a milestone. Non-QM loans crossed 10% of total lock volume for the first time, up 1.4 percentage points from June and more than 2 points from a year earlier. Zoom out further, and nonconforming loans overall (non-QM plus jumbo) accounted for 20.8% of July production, a nearly 4-point jump year-over-year. Meanwhile, traditional conforming loans continued to shrink as a share of the market, falling to 47.3% from 52.2% just 12 months earlier.
In other words: even as higher rates cooled the broader market, more borrowers turned to loan options outside the conventional box. The data show this growth isn't coming from a single narrow group — it's broad-based, led largely by two products: bank statement loans and DSCR loans.
What's Actually Driving the Growth
Within July's non-QM lock volume, investor and debt-service-coverage-ratio (DSCR) loans accounted for 33.5% of production, while bank statement loans accounted for another 30.6%. Together, they make up nearly two-thirds of all non-QM activity. If you're self-employed or invest in rental property, there's a good chance one of these was built with you in mind.
Bank Statement Loans: Built for the Self-Employed
If you own a business, freelance, or otherwise work for yourself, you already know the frustration of trying to qualify for a mortgage using tax returns. Deductions and write-offs that reduce your tax bill can make your income look smaller on paper — which can shrink the loan amount a conventional lender is willing to offer or disqualify you altogether.
Bank statement loans solve that problem by looking at what actually comes into your accounts. Instead of tax returns, lenders review 12 or 24 months of personal or business bank statements to calculate your qualifying income based on actual cash flow. It's a more accurate picture of your finances for anyone whose tax returns don't tell the whole story — and it's a major reason this product now accounts for nearly a third of all non-QM lending.
DSCR Loans: Built for Real Estate Investors
For real estate investors, the traditional mortgage process can be its own obstacle course — pay stubs, W-2s, and personal debt-to-income calculations that don't account for the fact that the property itself is the income-generating asset.
DSCR (debt service coverage ratio) loans flip that approach. Instead of qualifying you based on personal income, the loan is qualified based on the property's rental income relative to its debt obligations. If the rent covers the mortgage payment, you're often in a strong position to qualify — regardless of your personal income documentation. That flexibility is exactly why investor and DSCR loans now make up the largest share of non-QM production.
Why This Matters Right Now
Beyond the growth numbers, the broader lock data tells an encouraging story about credit quality in this space. Average credit scores across all locks held steady at 730, and purchase debt-to-income ratios stayed below year-ago levels across loan types. This isn't a market loosening standards — it's a market where more well-qualified borrowers are simply choosing products that match how they earn income.
With higher rates and purchase-loan pull-through dipping slightly, the right loan structure matters more than ever. A bank statement or DSCR loan won't be the right fit for everyone, but if you've been turned away — or assumed you wouldn't qualify — because of how your income looks on paper, it may be worth a second look.
If you would like to find out if a Non-QM loan is right for you, call a NASB expert at 888-661-1983, or click here for more information.
