Jumbo Mortgage Topics Covered
- What is a Jumbo Mortgage?
- How to qualify for a Jumbo Mortgage
- Benefits of a Jumbo Mortgage
- Disadvantages of a Jumbo Mortgage
- Jumbo Mortgage FAQs
What is a Jumbo Mortgage?
A jumbo home loan, also known as a jumbo mortgage, is a type of financing that exceeds the limits set by the Federal Housing Finance Agency (FHFA) — currently $647,200 for a single-family home in most states (there are high cost areas so check with your loan officer for a specific limit). Although they are nonconforming mortgages, jumbo loans still must fall within the guidelines of what the Consumer Financial Protection Bureau considers a “qualified mortgage”.
Jumbos are considered riskier for lenders because they can’t be guaranteed by Fannie Mae and Freddie Mac, meaning the lender is not protected from losses if a borrower defaults.
How to Qualify for a Jumbo Mortgage
Lenders set their own underwriting guidelines for jumbo loans, so eligibility requirements may vary. Make sure to get as much information as you can from each lender to understand their specific requirements and underwriting procedures for a jumbo loan.
- Jumbo loans are often attractive to homebuyers with more complex sources of income. With that in mind, it’s common for jumbo loans to require more paperwork and income documentation than conventional loans.
- San Antonio Lenders may require your FICO score to be higher than 700, and sometimes as high as 720, to qualify for a jumbo loan. Borrowers whose scores fall beneath the normal requirements usually have to offset it with a low debt-to-income ratio.
- Your debt-to-income ratio (DTI) should be under 43% and preferably closer to 36%.
- It’s not uncommon for lenders to ask jumbo loan borrowers to show they have enough cash reserves to cover ten months to one year of mortgage payments.
- 30 days of pay stubs and W2 tax forms stretching back two years, in addition to bank statements and information on any investment accounts.
- If you’re self-employed, you must show two years of tax returns and at least 60 days of current bank statements.
- Jumbo loans are manually underwritten. A finance expert will go through your credit report, assets and bank statements with a fine-toothed comb and bring to light any past missteps.
Benefits of a Jumbo Mortgage
- San Antonio Borrowers can get fixed- or adjustable-rate jumbo mortgages with various term options.
- You can buy various types of properties with a jumbo loan. As long as you meet your lender’s other requirements, there are no government restrictions on how you can use your jumbo loan. You can use most jumbo mortgages for primary residences, second homes, vacation houses and investment properties.
- While conventional mortgage loans usually require a 20% down payment, jumbo loan down payments can be as low as 5%, with 10% a more common figure.
- The average annual percentage rate (APR) for a jumbo mortgage is often par with conventional mortgages—and in some cases, actually lower.
- You have the opportunity to get more loan money to purchase a high-quality property.
Disadvantages of a Jumbo Mortgage
- Jumbo mortgage rates may be slightly higher than those on conforming loans.
- They have stricter qualification rules than other types of mortgages.
Frequently Asked Questions
What are jumbo loan amounts?
Jumbo mortgage loan amounts exceed the current maximum dollar amount guaranteed by GSEs. Overall, if more than $647,200 is needed to finance a home, the home would qualify for a jumbo loan. This amount can vary a little from state to state when you consider high-priced or luxury markets.
What’s the best program for a jumbo loan?
You are not limited to a 30-year fixed rate program with a jumbo mortgage. Many people choose an adjustable rate mortgage (ARM) program to take advantage of a lower interest rate and lower monthly payment.
A jumbo loan can be a great fit for homebuyers who are in a strong financial position and want to secure a large loan. As always, you should borrow with care and crunch the numbers carefully to see what you can truly afford and what kinds of benefits you will receive from a loan like this. It’s a good idea to compare terms to see if taking out a smaller conforming loan, plus a second loan, instead of one big jumbo, might prove better for your finances in the long haul.Questions? Contact J. Charles Lending Today!