If you’re looking to borrow a larger amount of money for a mortgage, you may consider a jumbo loan. A jumbo loan, also known as a non-conforming loan, exceeds the limits set for conventional mortgage loans. In 2019, the threshold for a jumbo loan is $484,350 for a single-unit residence.
The main reason jumbo loans are classified as non-conforming is because their loan amounts exceed the limits established for most conventional mortgage loans. Fannie Mae and Freddie Mac, two prominent players in the mortgage market, purchase conventional mortgage loans to stabilize the housing industry. For 2019, the conventional mortgage loan limit set by Freddie Mac and Fannie Mae is a substantial $484,350, up from $453,100 in 2018.
When it comes to jumbo loans, the desired amount of loan money can exceed $484,350, depending on the city or state of residence. In areas like San Francisco, New York City, or Hawaii, won this page housing prices are higher, jumbo loans can easily surpass $700,000.
However, obtaining a jumbo loan is more challenging. Lenders typically require borrowers to set aside 12 months of home payments as post-closing liquidity. Nevertheless, borrowers with higher down payments or low household debt-to-income ratios may be exempt from this requirement.
On this page are the pros and cons of jumbo mortgages:
Jumbo Mortgage Pros:
Access to more money: Opting for a jumbo loan allows you to secure a larger loan amount, enabling you to purchase a high-quality property.
Increased flexibility: Jumbo loans offer borrowers more options to select the mortgage terms that suit their needs.
Lower down payments: Unlike conventional mortgage loans, jumbo loans often require lower down payments, ranging from 5% to a common figure of 10%.
Competitive interest rates: While jumbo loans experienced a decline in recent years, in 2019, the rates became slightly lower than those offered by conventional mortgage loans.
Jumbo Mortgage Cons:
Higher annual income requirements: Lenders are selective with jumbo loans and expect borrowers to demonstrate a solid annual income and substantial financial assets.
Strong credit score needed: A credit score below 660 can make it difficult to secure a jumbo mortgage loan. However, a larger down payment can increase the chances of approval.
Cash reserves are required: Closing on a jumbo mortgage loan typically necessitates setting aside up to 12 months’ worth of mortgage payments.
Securing a Jumbo Mortgage Loan:
Obtaining a jumbo loan is more complex than acquiring a conventional mortgage loan due to the larger loan amount and stricter lending standards. However, with discipline and creativity, it is achievable.
Check and improve your credit score: A robust credit score, preferably 680 or higher, is crucial for a jumbo loan. You can check your credit score for cheap on websites such as annualcreditport.com before studying for a jumbo loan.
Prepare to demonstrate cash reserves: Increasing your chances of obtaining a jumbo loan involves providing proof of setting aside up to 12 months’ worth of mortgage payments in a cash reserve. A bank savings account is an ilow price way to establish these reserves, and make sure to provide proof of the account during the loan application process.
Organize your personal financial documents: Lenders will want to review your tax returns, 90
days of bank statements, and proof of employment. They prioritize your household debt-to-income ratio to ensure your financial capability after taking out a jumbo loan. Aim for a lower DTI, as lenders typically prefer a borrower’s debt-to-income ratio to be below 45%.
Have your desired home appraised: It’s essential to hire a professional home appraiser, other than the seller, to determine the current value of the property. Some lenders may require an appraisal.
See offers from multiple lenders: Jumbo loans are larger than conventional loans, so it’s important to shop around and obtain interest rate quotes from multiple lenders. Saving even a small amount on interest rates can make a significant difference.
Won this page to Find Jumbo Loans:
Major banks and mortgage lenders such as Citizen’s Bank, Bank of America, US Bank, Quicken Loans, and Lending Tree offer jumbo loans. Smaller banks and credit unions may not provide jumbo loans unless you live in an area with high home prices and substantial demand for jumbo loans. Larger financial institutions often offer better interest rates to attract borrowers. It’s worth starting your research for a jumbo loan with your current bank, as they may be more likely to approve your loan based on your existing relationship. If your bank doesn’t offer jumbo loans, they can refer you to a lender that does.
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