If you are looking for a mortgage above the typical loan limit, you may have more than one option when it comes to jumbo loans. Some jumbo mortgages use traditional income and asset documentation, while others fall into the non-QM category. Non-QM allows for different ways to evaluate income, assets, or the property.
One important distinction is that a jumbo loan is not automatically a non-QM loan. Jumbo describes the size of the mortgage. Non-QM describes a loan that does not meet all of the requirements of a Qualified Mortgage. So, a loan can be jumbo and still meet QM requirements, or it can be both jumbo and non-QM.
Understanding that difference can make it easier to compare financing options for a higher-value property.
What Makes a Mortgage a Jumbo Loan?
A mortgage is considered a jumbo loan when the amount you borrow is higher than the conforming loan limit set by the Federal Housing Finance Agency (FHFA).
Conforming loan limits are the maximum loan amounts that Fannie Mae and Freddie Mac can purchase. These limits are updated each year and may be different depending on the location and type of property.
If your loan amount is higher than the limit that applies to the property, it is considered a jumbo loan. Because jumbo loans are above these limits, the rules for qualifying can vary.
Are Jumbo Loans Considered Non-QM?
No. Jumbo loans and non-QM loans are not the same thing. A jumbo loan can still meet the rules of a Qualified Mortgage. If it does not meet those rules, it may be considered a non-QM loan.
The table below shows the main difference between the two.
| What It Tells You | Jumbo | Non-QM Loan |
| What defines the loan | Loan amount | Underwriting & loan requirement |
| Uses conforming loan limits | Yes | No |
| Can finance higher-value properties | Yes | Program dependent |
| May offer alternative ways to qualify | Program dependent | Program dependent |
This matters because two people borrowing the same amount may qualify for different loan programs.
Traditional Jumbo vs. Jumbo Non-QM Loans
A traditional jumbo loan may be a good fit for someone who can show their income and assets using standard documents.
Depending on the type of loan or loan program, a lender may review:
- Tax returns
- W-2s
- Pay stubs
- Bank and investment accounts
- Credit history
- Current debts
- Cash reserves
- Additional details about the property
A jumbo non-QM loan may be another option when the loan amount is above the conforming limit, but the standard documents needed do not fully show the borrower’s financial situation.
Of course, borrowers still have to qualify for a non-QM loan. The main difference is that the lender may use different documents or rules to review the borrower’s ability to repay.
Who May Consider a Jumbo Non-QM Loan?
Jumbo non-QM financing may be an option for borrowers whose income, assets, or property do not fit standard mortgage guidelines.
Self-Employed Borrowers
A business owner’s tax returns may not show all of the money the business brings in. This is especially the case when business deductions lower taxable income.
Depending on the loan program, self-employed borrowers may be able to use personal or business bank statements to show their income instead of relying only on tax returns.
Borrowers With Significant Assets
Some borrowers have a lot of money in savings or investments but do not earn most of their income from a regular job. In that case, non-QM programs may allow some of those assets to count when a lender reviews income. This can help borrowers whose finances are tied more to investments or other liquid assets than to a traditional paycheck.
Borrowers With Complex Income
Executives, investors, business owners, and other borrowers may earn money from several different sources instead of one regular salary.
If standard documents do not clearly show that income, a non-QM loan may offer another way to qualify.
Real Estate Investors
There are some non-QM loans that are made for investment properties. For example, certain DSCR loans look at the rental income and cash flow from the property instead of looking at the borrower’s personal income.
Condos and Co-ops
The borrower is not always the reason traditional financing becomes difficult.
Some condominiums and co-ops do not meet standard agency eligibility requirements. Depending on the program, non-QM financing may be available for certain properties.
What Do Lenders Look at for a Jumbo Loan?
There is no single set of rules for qualifying for a jumbo loan. Requirements can change based on the lender, loan program, property, and borrower.
A lender may look at:
- Credit history. Your credit history shows how you have handled debt in the past.
- Income and documents. The lender may ask for different documents depending on the loan program and how you qualify.
- Assets and reserves. You may need to show that you have enough money saved after closing.
- Current debts. Mortgage payments, loans, credit cards, and other monthly debts may affect whether you qualify.
- Down payment or equity. The amount you need can depend on the property, loan size, and loan program.
- Property type and value. The type and value of the property can also affect which jumbo loan options are available.
Jumbo loans are not all the same. If you do not qualify for one jumbo loan program, there may be other options to consider.
How to Compare Jumbo Loan Options
Start with two questions: how much do you need to borrow, and how will you qualify?
If the mortgage is above the conforming loan limit but you have straightforward income and standard documents, a traditional jumbo loan may be a good fit.
If the loan is also above conforming limits and your income, assets, or property fall outside traditional guidelines, jumbo non-QM financing may be worth exploring.
What to Look at Before Choosing
GuardHill Financial can help you with both jumbo and non-QM financing and has worked with borrowers with a range of financial situations. A mortgage professional can review the property, loan amount, income, assets, and documentation to help determine which available programs may fit. Contact us, and we will put you in touch with a mortgage specialist today!
Frequently Asked Questions
Is a jumbo loan a non-QM loan?
Not always. A jumbo loan is based on the amount you borrow, while a non-QM loan is based on how the loan is qualified. A jumbo loan can be either QM or non-QM.
What is a jumbo non-QM loan?
A jumbo non-QM loan is a mortgage that is above the conforming loan limit and does not meet all Qualified Mortgage rules. Depending on the program, borrowers may be able to use different documents or methods to show income and qualify.