Jumbo Loans – Understanding the Basics
If you are looking for homes on the pricier end, you will probably hear the term “Jumbo Loans”. It’s important to have a basic understanding of the Jumbo Loan program to know what it can offer you.
What is a Jumbo Mortgage?
Jumbo Loans are for mortgage amounts which exceed the conforming conventional loan limit that are set by Fannie Mae and Freddie Mac. Currently loan amounts that exceed $417,000 are considered to be Jumbo.
How can I qualify for a Jumbo Loan?
When qualifying for a Jumbo Loan, it is common to expect more stringent underwriting guidelines such as the following:
- In most cases, debt ratios are not to exceed 43%
- Additional appraisals can be required for loan amounts above $1,000,000
- No previous bankruptcies or foreclosures (varies per lender)
- Higher minimum credit scores for higher loan amounts
- Higher liquid reserves (funds that remain after closing occurs)
- Larger down payment requirements
Important things you should know about a Jumbo Loan…
Interest rates for Jumbo Loans are customarily higher than conventional programs, and buyers may also look to Adjustable Rate Mortgage (ARMs) as an alternative option.
Each lender can have their own underwriting criteria, but be cautious of the following potential red flags:
- First time homebuyers can be considered ineligible or limited with qualifying
- Restrictions can be placed on gift funds used as a down payment
- Investment properties may not be an eligible property type
- Condominiums can be possible- but additional details will be needed
- Separate underwriting guidelines for increased loan amounts may be needed such as
- Mortgage amounts up to $1,000,000
- $1,000,000 to $1,500,000
- $1,500,001 to $2,000,000
- $2,000,001 to $2,500,00 (etc.)
Are you interested in Jumbo Mortgage?
Without the right assistance, qualifying for a Jumbo Mortgage can be very difficult and overwhelming. It’s always best to discuss your options with a lender you can trust like Metroplex Mortgage Services. Our financing expertise has helped thousands of homebuyers become happy homeowners and we can help you too!
If you are in the market for a home it is important to become pre-qualified. You can get started in less than 5 minutes! Or you may contact us with any questions you may have.
Questions? Contact Us Here.
More specific loan program information can be found at our Jumbo Loan Blog.