Everything You Need to Know About Non-QM

What Does Jumbo Loan Mean?

A Jumbo Non-QM loan can be the right choice if you’re looking to get a home loan and don’t feel like you qualify for a government program


Introduction

If you're in the market for a home loan, you've probably heard of Fannie Mae and Freddie Mac. These are two government-sponsored enterprises (GSEs) that help ensure there's enough money in the secondary mortgage market. But what about jumbo loans?
 
Jumbo loans are typically those that exceed $647,200—this is known as "conforming". Because they don't meet this criteria, they can be difficult to get approved for if your financial situation doesn't fit their standards. However, there are ways around this by seeking out a non-QM loan (known as private lending or non-agency mortgages). This type of financing is easier to qualify for because it requires less documentation than conforming loans do due to fewer restrictions put on lenders by regulators such as Fannie Mae and Freddie Mac themselves. So let's look at what it takes to get approved for one of these types of loans:
 

What is a jumbo loan?

A jumbo loan is a mortgage amount that exceeds limits set by Fannie Mae and Freddie Mac, the government-sponsored enterprises that buy mortgages from lenders to support liquidity in the secondary mortgage market.
 
A primary difference between jumbo loans and conventional loans is that they are not eligible for purchase by Fannie Mae or Freddie Mac. This means they require a different buyer, which can lead to higher interest rates or fees because there's less competition among lenders.
 
Another way of thinking about it: Jumbo loans are those above $647,200 in 2022 for most of the country. This is where "jumbo" comes from (the limit varies slightly from state to state).
 
On top of being more expensive than other types of mortgages, jumbo loans also tend to have stricter terms when it comes down to qualifying criteria—you'll need at least 20% down payment—and closing costs like attorney's fees may be higher if you don't go through an online service.
 

How to get qualified for a Jumbo Non-QM Loan:

Getting qualified for a jumbo non-QM loan requires a bit more work than getting approved for a conventional mortgage. You’ll need to do your research and put in the effort to prove to lenders that you can afford the home you want, even if it costs more than most people can comfortably afford. Here are some ways you can get prepared:
 
  • Get pre-qualifies online. This will give you an idea of how much money you qualify for and what interest rate range makes sense for your situation.
  • Have good credit score. A good score shows lenders that you have taken care of any past debts and borrowed responsibly in the past, which makes them trust that they'll get paid back again when they lend to homeowners like yourself!
  • Have plenty of cash saved up as a down payment. A 20% down payment is considered ideal by many lenders because it shows that borrowers aren't taking on too much risk with their finances—and therefore won't default on their mortgages later on down the road due after falling behind on payments due to unforeseen circumstances.

What Does A Jumbo Home Loan Look Like?

A jumbo loan is a non-conforming loan. Conforming loans are mortgages that meet Fannie Mae and Freddie Mac requirements and can be sold to investors in the secondary market.
 
Jumbo loans are typically used to buy homes that are more expensive than the conforming limit of $647,200 in most areas, but they can be used for any type of property (except manufactured homes). The limit on Jumbo loans has increased through out the years and is expected to increase in 2023.
 
The reason why banks want so much collateral from borrowers is because their loans carry more risk than other types of mortgages do; thusly lenders want some sort of protection against borrower default before making such large-scale investments into real estate projects like yours!
 

Are There Any Drawbacks To A Jumbo Non-QM Loan?

Jumbo loans are not for everyone. The higher interest rates, longer closing times and more paperwork can be frustrating for some borrowers. There are also credit requirements to consider as well. If you have less than perfect credit, but want to buy a home in the $1 million price range, a jumbo loan may not be an option for you.
 
If any of these issues are problematic for you and your situation, don't worry! There are plenty of other types of loans available that won't require such strict guidelines.
 

A jumbo non-QM loan can be a good option if you do not meet the government standards for a conforming loan.

If you don't meet the government standards for a conforming loan, a jumbo non-QM loan might be your best option. A jumbo non-QM loan is a home loan that is larger than the conforming loan limit. The jumbo non-QM limit varies by state and year
This type of mortgage can be good if:
  • You have an excellent credit score (generally 620 or higher)
  • Your income is at least two times greater than the monthly mortgage payment
  • The value of your home meets or exceeds what you're applying for

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