The federal government sets restrictions on how much you may borrow. While the average purchase price easily falls within these parameters, what happens if you need a loan that exceeds the boundaries? This is where jumbo loans come in.
What is a Jumbo Mortgage?
Jumbo mortgages are perfect for funding more expensive, luxury homes. They refer to loan amounts that fall outside the conforming loan limits set by the Federal Housing Finance Agency (FHFA) each year. As of now, the conforming loan limit for most of the United States is $647,200. Any loan that exceeds this amount is a jumbo loan.
As a non-conforming loan, jumbo loan programs are not backed by any of the government-sponsored entities. They are available as both fixed-rate and adjustable-rate mortgages.
Why Do You Need a Jumbo Mortgage?
A jumbo mortgage is a loan designed for borrowers who need to finance a loan amount that exceeds the lending restrictions of conventional loans. They can be utilized to purchase primary residences, second or holiday houses or investment properties.
But, remember, as jumbo loans signify more risk for the lenders, borrowers usually need to be able to afford a substantial down payment and have a high credit score in order to qualify.
What Are the Qualifications for Jumbo Loans?
The requirements for jumbo mortgages vary depending on the lender and the applicant. typically, the qualifications for jumbo loans are stricter than those of conventional loans. Here is what you need to know about qualifying for jumbo loans.
Credit Score
To qualify for a jumbo mortgage, lenders typically need a minimum credit score of 680. However, some mortgage bankers are more stringent. Jumbo loans normally require a higher credit score than other types of home loans since they carry a higher risk for lenders.
Larger Down Payments
For some FHA loans, you may be able to put down as little as 3.5%. Jumbo loan lenders may request a 15% to 30% down payment. In addition, you will not have to pay private mortgage insurance (PMI) if you put down at least 20% on a home.
Debt-to-Income Ratio (DTI)
You typically need a DTI of 43% or less to qualify, although some jumbo mortgage lenders may require a DTI as low as 36%.
Additional Appraisal
You will probably have to submit a second appraisal of the home you are buying so that your lender can confirm the market worth of the property.
If your dream property is more expensive and elaborate than conventional loans can cover, get in touch with Lynx Mortgage Bank LLC today. Our experts will walk you through our loan products and help you choose the best option for your situation.
