Mortgage Lending Was Built for W-2s. The Market Has Moved On.
By Wes Costello, EVP of Sales Operations at AnnieMac Home Mortgage
For decades, the mortgage industry has relied on traditional credit lines and W-2 income documentation as the primary gatekeepers to homeownership. That approach worked when most borrowers earned predictable income from a single employer and documentation followed a standard pattern. Today, this framework no longer reflects how many Americans are making a living.
More borrowers are financially qualified to buy homes, but a growing share earn income outside the traditional income model. The share of Americans holding multiple jobs — often combining W-2 wages with 1099 or business income — is the highest it has been over a decade and is only expected to grow. Full-time independent workers more than doubled between 2020 and 2025, rising from 13.6 million to 27.6 million. Even among workers with traditional employment, 36% report earning income through an independent, entrepreneurial stream.
These changes have introduced friction between how people earn and how lenders evaluate income and credit. Underwriting models have not kept pace with the changing workforce.
While the workforce has evolved for buyers, sellers have little tolerance for uncertainty late in the transaction and accept offers they expect to close with predictability. Lenders must work to close this gap by expanding how income is evaluated and how risk is managed. That divide is driving the growing role of Non-QM lending and the removal of lending-related purchase contract contingencies – to provide buyers with greater access to financing, and sellers with the certainty they need.
Why Non-QM Is Growing
Non-QM lending serves creditworthy borrowers whose income cannot be documented through standard W-2 forms. Rather than relying solely on traditional documentation, Non-QM evaluates repayment ability using verifiable indicators such as bank statements, business revenue, assets, and cash flow.
Traditional underwriting models struggle to properly evaluate borrowers whose earnings flow through multiple streams or business structures, including entrepreneurs, contractors, investors, and self-employed professionals, who generate sufficient income.
Non-QM lending extends credit to these modern earners, while evaluating credit worthiness and ability to repay in a modern framework. Demand for these products has grown accordingly. Non-QM loans reached over 9% of total mortgage lock volume as of late 2025 — a significant increase from prior years.
That growth underscores the need for lenders to adapt. For AnnieMac Home Mortgage (“AnnieMac”), it has reinforced our focus on supporting creditworthy borrowers with non-traditional income. Non-QM production has expanded across the industry, averaging roughly
$50 billion per quarter in 2025. That trend has been reflected at AnnieMac, where we funded more than $220 million in Non-QM volume in 2025 that otherwise could have exited the pipeline.
Appraisal Certainty Matters More Than Ever
Income qualification is only one pressure point. Appraisal risk remains a common reason mortgage deals break down late in the process, often after weeks of work and sunk costs, and is a leading cause of renegotiations and terminated purchase contracts.
The risk of an appraisal coming in below contract price is a risk that sellers with multiple offers can afford to avoid. A low appraisal can force last-minute price adjustments, require buyers to bring additional cash, or derail a transaction entirely, outcomes that are increasingly unacceptable given modern expectations for speed and certainty. As a result, appraisal assurance has become an increasingly important tool.
Appraisal Assurance by AnnieMac Cash2Keys addresses valuation risk upfront by leveraging technology and valuation expertise. The result is a value that is backed to a defined LTV and payment by the lender. This eliminates the chance that the independent appraisal outcome can disrupt a deal after contracts are signed. Buyers gain confidence and avoid the temptation of overpaying to have their offer win. Sellers gain predictability. Closings become cleaner.
Financing with Appraisal Assurance is more reliable. Offers become more competitive. Timelines compress. In markets where certainty determines whether a deal moves forward, those advantages matter.
In the 2nd half of 2025, AnnieMac funded over $125 million in Appraisal Assurance purchase volume. That level of adoption signals how strongly the market values certainty and why lenders are prioritizing tools that reduce late-stage deal failures and the sunk costs that come with them.
Meeting Buyers Where They Are
The mortgage industry is adapting to structural changes in how Americans work and earn. A growing share of buyers no longer fit a one-size-fits-all underwriting model. At the same time, sellers demand speed, certainty, and fewer surprises.
Non-QM lending and Appraisal Assurance are practical responses to a market that has already shifted. Lenders that recognize this reality will not only expand access to credit, they will deliver more certain outcomes to all stakeholders in the housing industry, create new relationships, and close more deals.
The workforce has evolved. Mortgage execution needs to keep evolving with it.