If you’re in the market for an expensive home but lack funds for a down payment, consider getting a jumbo mortgage. These loans are not insured by Fannie Mae or Freddie Mac and present lenders with more risk, necessitating more stringent underwriting criteria.
Andrina Valdes, COO of Cornerstone Home Lending in San Antonio, TX, suggests that you might require a jumbo mortgage if your home’s value exceeds the Fannie Mae and Freddie Mac loan limits for your area. In such cases, she suggests, you might have to pay either an increased interest rate or increase your down payment amount in order to stay within these limits.
Your credit score is important when applying for a jumbo loan. Generally, you need a score of 700 or higher to be approved.
Additionally, you must demonstrate to your lender that you have enough cash in the bank to cover at least 12 months’ worth of mortgage payments and other expenses for at least a year. Some lenders require up to 12 months worth of reserves before approving a jumbo mortgage.
Income is another critical element in qualifying for a jumbo mortgage. You’ll need to demonstrate that your credit history is good and your income sufficient to pay back the loan.
Debt-to-income ratio (DTI) is an important tool lenders use to assess whether you can afford your new mortgage payments, car payments and credit card bills. A low DTI demonstrates that you have enough resources to meet all of your monthly obligations without going into debt.
Bruce Ailion, a Realtor and real estate attorney in Atlanta, emphasizes that your down payment can have an impact on the terms of your jumbo mortgage. According to him, recent years have seen relaxed requirements regarding down payment amounts required for these loans, allowing buyers to use less than 30% of the purchase price as security for a loan.
However, you’ll still need to meet the standard mortgage qualifications for a jumbo loan, including passing a credit check and making at least 10% down payment. A higher down payment could save you money in interest over the loan’s life span and help avoid private mortgage insurance.
Additionally, you must demonstrate your ability to make regular mortgage payments on your new property. Typically, this entails providing a copy of your most recent paycheck and bank statements.
If you have any queries about a jumbo mortgage, speak with an experienced lender today. They can guide you through the process and assist in finding the ideal home loan tailored to meet your requirements.
Jumbo mortgages are an excellent option for those seeking to purchase a luxury home in areas with no conforming loan limits. While they do come with their advantages, it’s essential that you understand their drawbacks so you can make an informed decision regarding your mortgage choices.