Jumbo Mortgage Loans
What is a Jumbo Loan?
A type of loan financing that exceeds the loan limits set in place by the Federal Housing Finance Agency (FHFA). A jumbo loan cannot be purchased, guaranteed, or securitized by Fannie Mac (FNMA) or Freddie Mac (FHLMC).
As average home prices have continually gone up and we remain in a seller’s market, a jumbo loan is a stellar option if you are buying a large home or property that requires a loan amount that exceeds the conforming loan limit set by the federal government.
- Jumbo loans are considered to be a higher risk; therefore, potential borrowers have to show they are in a good financial status.
- Approval requires a stellar credit score and a very low debt-to-income (DTI) ratio.
- Potential buyers will undergo a more in-depth credit requirement review than when applying for a conventional loan.
- Although Jumbo loans are considered to be a NonConforming Mortgage, the Jumbo loan must still fall within the guidelines of what the Consumer Financial Protection Bureau (CFPB) considers a “Qualified Mortgage”
- High Credit Score – 700 and above
- DTI – Debt-to-income ratio below 43% (preferably closer to 36%)
- Assets – Cash Reserves (the amount of cash in your bank)
- A lender may ask for proof that you can cover 6-12 months of mortgage payments (PITI) and closing costs with funds in your bank account.
- Down Payment – 10% to 15% of the sales price
- To avoid PMI – a 20% down payment is required
- LTV – Loan-to-value ratio: The lower, the better chance of having a lower interest rate. If your LTV is too high, the lender can make the decision not to offer financing
- LTV is calculated by dividing the loan amount by the Appraised value or Purchase price for the property – the lower of the two.
- Annual tax returns for the past 2-3 years for self-employment and W2 employed applicants
- W2’s for the past 2 years
- Paystubs covering the most recent 30-day period
- Bank statements or assets equivalent covering the most recent 60-90 day period to validate sufficent assets to meet closing requirements; and 6 to 12 months may be required to validate available reservers (PITI) at the discretion of the lender.
- Jumbo loans are considered to be a higher risk; therefore, potential borrowers have to show they are in a good financial status.
- Jumbo loans are considered to be a higher risk; therefore, potential borrowers have to show they are in a good financial status.
- Jumbo loans are considered to be a higher risk; therefore, potential borrowers have to show they are in a good financial status.