Buying a home is a major investment, and if you’re looking to purchase one you may want to consider non-QM jumbo loans.   Mortgages come in many forms, including interest-only loans and asset-utilization loans. If you’re a first-time buyer, you’ll want to be sure you know your options before making a decision.

  • Interest-only loans

During the early and mid-2000s housing market, interest-only loans became popular. These loans allowed borrowers to pay only interest for a period of three, five years or seven years. Then, the borrower could refinance the loan into a fully amortizing mortgage. This allowed the borrower to have greater flexibility when it came to their mortgage payment.  However, after the housing crisis and Great Recession, interest only loans largely disappeared.  

If you plan to purchase or refinance a home in the next year or two, an interest-only mortgage might be a good idea. However, you should speak with your Mortgage Loan Originator to fully understand how they work and what potential issues might arise should you decide to get one. 

  • Asset Utilization Jumbo Loans

Whether you are a retiree, self-employed, or an investor, an asset utilization mortgage can help you qualify. An asset utilization home loan is a loan that uses your qualifying assets instead of traditional income. The most obvious way to qualify for an asset utilization mortgage is to have enough liquid assets to cover the mortgage and your living expenses. This can be a combination of assets like a checking or savings account, a money market account, retirement accounts, stocks, or mutual funds.

However, an asset utilization mortgage may not fit every borrower well. For instance, people with bad credit may not qualify for this loan. Asset utilization mortgages can be a boon for borrowers with significant assets. However, you may want to consider other loan programs if your needs are not fully met with an asset utilization mortgage. Another way to qualify for an asset utilization mortgage is by using an asset depletion loan. These types of loans work by dividing the value of your assets into a set number of months, which creates a monthly income.

  • Borrowers with poor credit history

Using non-QM jumbo loans for borrowers with poor credit history can be a good way to get the financing you need, especially if you don’t qualify for a qualified mortgage. However, borrowers need to be aware certain things.  Many people lost their homes when the Great Recession hit the United States. This led to a large number of borrowers defaulting on their mortgages. The resulting damage to the economy created new rules for mortgage lenders. These rules were designed to protect borrowers from entering loans they couldn’t afford. These rules also created more stable borrowing requirements that might disqualify certain individuals.

Non QM jumbo loans for borrowers with a poor credit history are unlike subprime loans from a decade ago. They have a higher level of regulatory protection and are making mortgage loans available to more people. While these loans have higher interest rates, they are also less risky. Borrowers can qualify with lower credit scores.  

Last Words

First-time home buyers have several options when it comes to mortgages. One option that is growing in popularity is the non-QM jumbo loans. This type of loan allows for more flexibility in terms and credit score requirements, making it a great choice for first-time buyers who may not meet traditional mortgage criteria.