This BLOG On Using Non-QM Versus Jumbo Mortgages To Buy High-End Homes Was PUBLISHED On October 5th, 2020
Home prices are not cheap.
- Home values have been increasing year after year since 2012
- The Federal Housing Finance Agency (FHFA), the federal agency that is in charge of loan limits on Conventional Loans, has raised conforming loan limit for the past three years
- Conforming Loan Limit for 2020 is $510,400
- HUD, the parent federal agency of the Federal Housing Administration (The FHA) followed FHFA’s lead and increased FHA Loan Limits for 2020 to $331,000
This is HUD’s fourth FHA Loan Limit increase in the past four years.
Conforming Loan Limit Increases Again For 2020
Both FHFA and HUD increased loan limits due to increasing home prices nationwide:
- High-Balance Conforming Limit has increased to $726,525
- Many counties in areas where home prices are above the national median are considered high-cost areas
- Any loans that do not conform to Fannie Mae and/or Freddie Mac Mortgage Guidelines are called non-conforming or Jumbo Loans
- Conforming Loans are conventional loans that conform to Fannie Mae and/or Freddie Mac Guidelines
- If loans do not meet Fannie/Freddie Lending Requirements, it is called non-conforming loans
- Jumbo Loans are not conforming loans because they exceed Fannie Mae and Freddie Mac maximum $484,350 conforming loan limits
In this blog, we will discuss Using Non-QM Versus Jumbo Mortgages and the benefits of Non-QM Loans.
Using Non-QM Versus Jumbo Mortgages And Reasons Why
There are cases where Using Non-QM Versus Jumbo Mortgages is necessary when buying high-end homes. Traditional Jumbo Loans normally require the following:
- 720 credit scores or higher
- A mandatory waiting period of 7 or more years after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale
- Most lenders will require a maximum debt to income ratio of 41% DTI or less
- 20% to 30% down payment
- Perfect credit with no late payments in the past 2 years
- No collections or charge off accounts
- Income tax returns are required by self-employed borrowers
- Non-Occupant borrowers are not allowed
Traditional Jumbo Loans are considered higher risk loans by lenders. This is why they have tougher mortgage guidelines than government and conventional loans. Many self-employed borrowers often had a difficult time qualifying for traditional Jumbo Mortgages due to them taking advantage of unreimbursed expenses and tax write-offs allowed by the IRS.
Benefits Of Using Non-QM Versus Jumbo Loans To Purchase High-End Homes
There are many benefits of Using Non-QM Versus Jumbo Mortgages to purchase higher-end homes.
Here are the Using Non-QM Versus Jumbo Mortgages:
- Minimum credit scores down to 500 FICO
- No maximum loan limit on Non-QM Jumbo Loans
- Maximum debt to income ratio up to 50% DTI with compensating factors
- No private mortgage insurance required
- 5% to 25% down payment
- 5% down payment Non-QM Jumbo Loans requires a 720 FICO
- Down payment requirements depends on the borrower’s credit scores and the type of property
- No waiting period requirements after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale
- Bank statement loan program for self-employed borrowers where no income tax returns are required
- Non-Occupant Co-Borrowers allowed
- Late payments in the past 12 months allowed
- Non-QM Loans are allowed for primary, second homes, and investment property financing
- Asset Depletion Loan Programs for borrowers with no income but with substantial assets
Gustan Cho Associates have multiple Non-QM Jumbo Investors. If a borrower does not meet particular investor mortgage guidelines, exceptions can be made on a case by case scenario.
For more information on this blog and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at email@example.com. Team at Gustan Cho Associates are available 7 days a week, evenings, weekends, and holidays.