Jumbo mortgage loans can help you to purchase your dream home or refinance if you owe more than $417,500 on your home mortgage. Home values are rising throughout the country and jumbo home loans will become more necessary for home buyers looking to purchase high end or luxury homes. In some parts of the country, like California, it is extremely difficult to find a home in the dream neighborhood for under the conforming loan limit. In order to buy a home for more than $417,500 a buyer needs to either pay a larger down payment or use a jumbo purchase loan.
The underwriting guidelines for jumbo loans are more stringent than a traditional mortgage simply because the bank is taking a larger risk by issuing more money. Additionally jumbo loans are typically held by the bank that issues them, rather than being sold on the secondary market. Since the bank keeps the loan on its books they want to be sure that the borrower is qualified and able to make the loan payments.
If you are considering purchasing a new home, or need to refinance your jumbo loan, it is best to speak with a mortgage banker that is experienced at this type of loans. By navigating underwriting requirements, they can help you to secure the loan you need at the best interest rate.
Qualifying for a Jumbo Loan
• Steady income history – The bank will want to see a history of steady employment and verifiable income. Prior to contacting your mortgage lender gather two months of recent pay stubs along with two years of tax returns. If you are using investment or rental income you will also need to provide supporting documentation.
• Good credit rating – Banks require a good credit rating as part of the approval process for a jumbo mortgage loan. This means a minimum of a 680 credit score with 720 being preferable.
• Down payment – Jumbo loans are typically for 80%, or less, of the total purchase price or home value. Many banks only want to finance 70% so be prepared to come up with 20% – 30% for a down payment.
• Owner Occupied – You need to live in the home as banks will typically not finance a rental property with a jumbo loan.
• Cash Reserves – The mortgage lender will want to see enough cash reserves to cover the payment for six to twelve months. This is an important step to protect them in the event that a borrower loses their job or experiences financial difficulty.
Jumbo loans come in 15, 30, and 40 year fixed terms as well as adjustable rate mortgages (ARM) loans. This will enable you to select the mortgage term that meets your payment needs and long term financial goals. Extending out the mortgage term will help to keep the loan payment affordable even though the loan amount is higher than normal. Using an ARM loan can also reduce the interest rate, which further reduces the mortgage payment. Contact an experienced jumbo mortgage banker today to learn how you can use a jumbo loan to purchase your dream home.