Jumbo and Non-conforming Loans Explained
Jumbo loans fall into the non-conforming loan category, as they fall outside of conforming loan guidelines. Jumbo loans typically go up to $2 million, but there are “Super Jumbo” programs that can lend up to $5 million.
Non-conforming loans are unique product offerings that mortgage companies create and service. Also known as “Portfolio Loans” there are a wide variety of niche products with various down payment options and FICO requirements.
Not all non-conforming loans are Jumbo. If the borrower OR the property falls outside of Fannie Mae and Freddie Mac conforming and government (FHA or VA) loan guidelines, they may need to pursue a non-conforming loan.
Below is a list of the most common non-conforming loans that fall within conforming loan limits:
• Percentage of units with less than 51% owner occupied status
• Litigation on the development that might impact structural soundness or safety
• Reserve funds being less than 10% of the managing association’s budget
• More than 15% of owners being delinquent on their monthly association dues
• Excess commercial space and hotel like characteristics
• A single entity owning more than 10% of the units in the project, including the developer
Self Employed Borrowers:
A self employed borrower is a business owner, business partner or a contract employee.
• Typically, a lender will average income from the most recent filed two years tax returns, but at times may only require the most recent year
• If a borrower is not able to document two full years via tax returns, a non-conforming loan may be an option
• When tax write-offs are high, some lenders will allow bank statements to document monthly income by averaging the income deposits
Other Unique Situations that Fall into Non-conforming:
• Business funds used for down payment and reserves
• Non-occupant co-borrowers on purchases
• Number of properties financed
• Loans to Foreign Nationals