Jumbo Mortgage

Non-QM Jumbo Loans

• Definition: Non-QM jumbo loans are large loans that do not meet the underwriting guidelines set by Fannie Mae and Freddie Mac. They are used for financing high-value properties that exceed conforming loan limits.
• Eligibility Criteria: More flexible guidelines determined by the lender. These include alternative income verification methods such as bank statements or 1099s instead of traditional tax returns.
• Credit Score Requirements: May be lower than conventional loans but generally require excellent credit scores due to the higher risk involved.
• Down Payment Requirements: Often higher than conventional loans, commonly requiring a minimum of 20% down payment.
• Interest Rates: Typically higher than conventional loans to compensate for the higher risk level to lenders, although they can sometimes be competitive depending on market conditions.
• Income Documentation: Lenders may look at bank statements, verified assets, or income from rentals instead of traditional employment verification.
• Typical Borrowers: Ideal for self-employed individuals, business owners, real estate investors, or those with unique financial situations that do not fit conventional loan criteria.

Conventional Loans

• Definition: Conventional loans are not backed by the government but are offered by private lenders or government-sponsored enterprises like Fannie Mae and Freddie Mac. They are the most common type of home loan.
• Eligibility Criteria: These loans must meet specific underwriting guidelines set by Fannie Mae and Freddie Mac, including credit score, down payment requirements, and income documentation.
• Credit Score Requirements: Generally, a minimum credit score of 620 is required.
• Down Payment Requirements: Typically 3% or higher, depending on the lender’s requirements.
• Interest Rates: Vary based on credit score, debt-to-income ratio (DTI), and loan-to-value ratio (LTV), but are generally competitive.
• Income Documentation: Requires W2s and tax returns showing two consecutive years of employment.
• Typical Borrowers: Suitable for average homebuyers with stable income and good credit history.

While conventional loans are suitable for average homebuyers with stable income and good credit history, non-QM jumbo loans cater to borrowers with unique financial situations requiring more flexible qualification criteria. Both loan types have their own set of advantages and challenges depending on the borrower’s needs and financial profile.