No, you're not stuck with it. A bank statement, P&L, asset depletion, or DSCR loan is not a life sentence. When you refinance, the new lender doesn't care much how you got the first loan done. What matters is your balance, your property's value, and whether you qualify for the new loan. Most people refinance out of one the same way they'd refinance any loan: once their documents qualify for something that fits better, and once the math on the new loan makes sense. What usually decides the timing is your tax returns, any prepayment penalty on the current note, and how long you've had the loan.
Why do people use non-QM loans in the first place?
Because their income is real but doesn't show up cleanly on a tax return. A business owner who writes off a lot of legitimate expenses can show a net income on Schedule C or a K-1 that's far below what the business actually deposits. A bank statement loan qualifies you on deposits instead. An asset depletion loan (also called asset utilization) qualifies you on savings and investments instead of a paycheck. A DSCR loan on a rental skips personal income and looks at whether the rent covers the payment. If you want the background, start with what a non-QM loan is.
That flexibility can cost something, which is why it's fair to ask how you get out later. It doesn't always, though.
I recently worked with a couple who qualified for both a conventional loan and a non-QM loan that used their assets as income. In their case the non-QM option was the stronger file. The debt-to-income ratio and loan-to-value were better, the pricing compared well with conventional, and the process would have been simpler. They still said no. When I finally asked why, the answer was that they didn't want problems when they went to refinance someday.
That worry is common, and it's mostly unfounded. If you can qualify for a conventional loan later, you can refinance into one later. The loan you have now doesn't hold that against you. The one real exception is a prepayment penalty, which mostly comes up with DSCR loans.
What has to change to refinance into a conventional loan?
For a self-employed borrower, the short answer is your tax returns. Conventional underwriting rebuilds your income from what you filed, not from your deposits. How underwriters calculate self-employed income goes through that in detail.
Fannie Mae generally wants a two-year history of self-employment income. It can work with less in specific cases: the most recent signed personal and business returns have to show a full 12 months of income from the current business, and you need a documented history of earning the same or more in the same line of work before that (Fannie Mae Selling Guide B3-3.5-01, checked Nov 2, 2026).
If you used an asset depletion loan, the exit looks different. You usually refinance out once you have income a conventional lender can document, such as a new salary, a pension, Social Security, or regular retirement distributions. If your situation hasn't changed, there may be nothing to refinance into, and that's fine.
So the real question is whether your filed returns will support the payment. If you keep writing off the same expenses, they may not, and that's a conversation to have with your CPA before you file, not after. I can show you what a given net income would or wouldn't support; I can't tell you how to file.
Hypothetical example (assumptions stated, not a real client): A Texas business owner bought a home with a 12-month bank statement loan. Deposits supported the payment, but the last two tax returns showed net business income well below what a conventional loan would need. Two filed years later, the returns show higher net income because the business grew and fewer one-time expenses were written off. At that point a conventional refinance becomes worth pricing out. Whether it actually makes sense depends on the new terms, closing costs, the current balance and value, and how long they plan to keep the home. None of that is known in advance, so treat this as an illustration, not a prediction.
Does a non-QM loan have a prepayment penalty?
It depends on whether it's your home or an investment property.
- Primary residence: Federal rules for consumer mortgages on a home only allow a prepayment penalty on certain fixed-rate qualified mortgages that aren't higher-priced, and even then it's capped and ends after three years (12 CFR 1026.43(g), checked Nov 2, 2026). A non-QM loan on your home generally doesn't fit that, so it generally won't carry one. Read your note anyway; it's the document that controls.
- Investment property (DSCR): DSCR loans are business-purpose loans, and prepayment penalties are common. A step-down structure, such as a penalty that shrinks each year for three or five years, is typical. More on that in DSCR loans in Texas.
In my experience, a two- or three-year prepayment penalty is the sweet spot for most investors, but it depends on your plans. A one-year penalty or no penalty at all is available. The tradeoff is that the prepayment penalty and the pricing work against each other. A shorter penalty, or none, means a higher interest rate and pricing. That can still be the right call if you expect to sell or refinance soon.
Here's how that played out for one investor I worked with. About two and a half years ago she did a DSCR cash-out refinance on one of her rentals to pull equity out. Her loan had a two-year prepayment penalty. By the time it ended, the options available to her had improved, and she needed more cash for a new project. We refinanced her again right after the penalty ended. She took out more cash, got a lower interest rate, and her monthly payment came out lower than before. Your result depends on your loan, the market, and your property, so treat this as one example, not a promise.
If you're planning to refinance a rental in the next couple of years, the prepayment term matters as much as anything else on the loan. Ask about it before you close, not when you're ready to refinance.
How long do I have to wait to refinance?
There isn't one waiting period for every refinance.
- Rate-and-term refinance: Often no fixed wait beyond what the new lender and the prepayment terms require.
- Cash-out refinance into a conventional loan: Fannie Mae requires the existing first mortgage being paid off to be at least 12 months old, measured note date to note date, and at least one borrower on title for six months, with some exceptions (Fannie Mae Selling Guide B2-1.3-03, checked Nov 2, 2026).
- Into another non-QM loan: Seasoning rules vary by investor. That's something I check scenario by scenario.
What if the property is in an LLC?
Many DSCR loans close in an LLC. A conventional loan generally won't. Fannie Mae counts the time an LLC you control owned the property toward its six-month ownership requirement, but the property has to be deeded out of the LLC and into your individual name to close (B2-1.3-03). Talk to your attorney and insurance agent before you move title. Some investors decide the LLC is worth more to them than a conventional loan and refinance into another DSCR loan instead. DSCR cash-out refinancing covers that path.
Does Texas law change anything?
If the loan you have now was a Texas home equity (cash-out) loan on your homestead, Texas home equity rules follow that property into later refinances. That's a separate topic, covered in cash-out refinancing in Austin. If that's your situation, tell me up front so we look at it before anything else.
Should you refinance out at all?
Not automatically. Getting out of a non-QM loan is only worth it if the new loan is actually better for you after closing costs. Sometimes the better move is to stay put, or to refinance into a different non-QM loan with terms that fit your plans. Compare the full monthly housing payment, the total cost to refinance, and how long you expect to keep the property. The refinance break-even calculator is a reasonable place to start.
What should you ask before you close a non-QM loan?
If you're about to take a bank statement, P&L, or DSCR loan, ask these now so the exit is clear:
- Is there a prepayment penalty, how long does it last, and how is it calculated?
- Is the rate fixed, or does it adjust? If it adjusts, when?
- Whose name, or which entity, will be on title?
- What would my tax returns need to show for a conventional loan to work later?
- If I want cash out in the future, when does the seasoning clock start?
Frequently asked questions
Can I refinance a bank statement loan into a conventional loan?
Yes, once your filed tax returns support the income a conventional loan needs. Fannie Mae generally looks for a two-year self-employment history, with a 12-month exception in specific cases.
Do DSCR loans have prepayment penalties?
Often, yes. DSCR loans are business-purpose loans on investment properties, and step-down prepayment penalties are common. The terms vary by loan, so check the note.
Can a non-QM loan on my primary residence have a prepayment penalty?
Generally no. Federal rules only allow prepayment penalties on certain fixed-rate qualified mortgages on a home, with caps and a three-year limit. Your note is what controls.
How soon can I do a cash-out refinance into a conventional loan?
Fannie Mae requires the existing first mortgage to be at least 12 months old, note date to note date, and at least one borrower on title for six months, with some exceptions.
Can I get a DSCR loan with no prepayment penalty?
Usually, yes. One-year and no-penalty options are available, but a shorter penalty generally means a higher rate and pricing. For many investors a two- or three-year penalty is the better balance.
Can I refinance out of an asset depletion loan?
Yes, once you have income a conventional lender can document, such as a salary, pension, Social Security, or regular retirement distributions.
Can I refinance a DSCR loan held in an LLC into a conventional loan?
Generally only if the property is deeded into your individual name before closing. Some investors refinance into another DSCR loan instead to keep the LLC.
Want to know if your current loan has a way out?
Send me your current loan terms and what's changed since you closed: new tax returns, more equity, different plans for the property. I'll tell you what the options look like, including when the answer is to wait. Contact me or start a loan application.
Adam Styer, Senior Loan Officer, NMLS #513013
The Styer Team, Powered by Go Rascal Inc. | Company NMLS #2072896
Texas only. Loans are arranged through third party lenders. This article is general information, not a commitment to lend, and not tax or legal advice. Programs, guidelines, and eligibility change and are subject to underwriting approval.