jumbo loans

A Jumbo Loan is a type of non-conforming loan that exceeds the loan limits set by Fannie Mae and Freddie Mac, and their regulator, the Federal Housing Finance Agency (FHFA). This type of loan is used to finance properties that are too expensive for a conventional conforming loan. The maximum loan amount for a conforming loan is $726,200 in most counties, as determined by the Federal Housing Finance Agency (FHFA). Homes that exceed this limit require a jumbo loan. 

Jumbo Loan Eligibility.  

While anyone can apply for a Jumbo Loan, remember that the requirements may be stricter than the application requirements for a Conventional Loan, since you will be borrowing an amount higher than the conforming loan limit. To apply for a Jumbo Loan, applicants must meet the following requirements: 

• Proof of Verifiable Income and Employment History.  Applicants must be able to prove sufficient income to support the proposed house payment and other qualifying debt (see DTI requirements below).  In most cases, a two-year history of employment is also required.  There are a few instances where the two-year employment requirement is not needed (such as an individual who just graduated from school, a retiree or someone whose income is derived from disability).
• A Minimum Credit Score of 680.  In general, you should strive for a credit score of 680 or above when applying for a Jumbo Loan. As with any mortgage loan, the higher your credit score, the lower your interest rate.
• Down Payment Requirement.  Most Jumbo Loan options require a minimum down payment of 10.01%. Unlike conforming loans, Jumbo Loans rarely have low down payment options because they are considered riskier for lenders because these loans are not insured by Fannie Mae and Freddie Mac, meaning the lender is not protected from losses if a borrower defaults.  Cash Reserve Requirement.  You’re more likely to be approved for a jumbo loan if you have ample cash in the bank. It’s not uncommon for lenders to ask jumbo loan borrowers to show they have enough cash reserves to cover 6 to 12 months of mortgage payments after paying the down payment and closing costs.
• Debt-to-Income Ratio (DTI) Requirement.  Jumbo Loans typically have a maximum DTI of 43%.  Your DTI is calculated by totaling the minimum payments on all your recurring monthly debts (student loans, credit card and installment payments, as well as your new proposed house payment), divided by your monthly gross income – expressed as a percentage. For example, if your new house payment is $5,000 per month, your car payment is $879 per month, and your minimum monthly credit card payment is $526, your total monthly debt is $6,405.   If your gross income is $15,200 per month, then your DTI is roughly 42% (6,405 ÷ 15,200 = 42.13).
• Mortgage Insurance (PMI) Requirement.   Making a down payment of less than 20% normally means you will need to pay for private mortgage insurance (PMI). This is true for most Jumbo loans. 
• Eligible Properties.  You can finance all types of properties including primary residences, vacation homes, and investment properties.

 Applying for a Jumbo Loan 

It’s easy. To get started, you will want to gather the following (that applies to you):

1. Proof of income and employment (pay stubs, tax returns, W-2 statements, retirement statements Social Security statements, child support and alimony documentation etc.)
2. Documentation of financial assets (bank statements, 401k statement, documentation of income from investments, etc.)
3. Most recent two Residential history (Name and Contact information for current landlord, etc.)
4. Identity information such as your unexpired Driver’s License and Social Security card.

If you have questions and would like to speak to someone, give us a call at 832.946.8400