Many mortgages consumer may be interested with a jumbo loan if they are looking for more money. On-conforming loan or jumbo loan is a mortgage loan of $484,350 or more if you are looking for a single unit residence for 2019.
The larger amount of the loan surpasses the limits of most conventional mortgage loans is the reason why jumbo loans are known as non-conforming loans. Mortgage loans, especially from the guidelines of Fannie Mae and Freddie Mac, are purchasing conventional mortgage loans to stabilize the U.S mortgage market. The conventional mortgage loan limit that Freddie (FMCC) and Fannie (FNMA) is a whopping $484,350 for 2019 before, it is $53,100 in 2018.
Home buyers want jumbo loans if they plan on getting a mortgage for more than $484,350 and it depends on the city or state where you reside. It can grow higher based on the market you are buying into. For example, if you buy a home in an expensive area of the U.S like San Francisco, New York City or Hawaii, a jumbo loan could rise exponentially often north of $700,000.
Jumbo loans are much tougher to obtain. 12 months of home payments are needed to be set aside by the homebuyers. It is called as post-closing liquidity. If you plan to borrow a much higher price, the higher the down payment, the lower the cash that borrowers will be needed to set aside.
If your home down payment is high or if the home loan borrower demonstrated a low household debt-to-income ratio, closing reserved can be waived.
Here are the pros and cons of a Jumbo Mortgage
Like any other loans, jumbo loans also have their pros and cons.
Jumbo Mortgage Pros
●More money- This is the number one benefit if you opt to a jumbo loan. You can have an opportunity to get more loan money for purchasing a high-quality property.
●Ample flexibility- it gives borrowers more varieties for choosing the mortgage that is suitable for them. Flexibility is loved by many borrowers and you can get just that when you have a jumbo loan.
●Low down payments- it comes with a low down payment. Conventional mortgage loans usually require 20% down payments. On jumbo loans, it can only be 5% with a common figure of 10%.
●Jumbo comes with competitive interest rates- in recent years, jumbo loans are declined but in 2019, it is slightly lower than s borrower will have in conventional mortgage loans.
©premiere lending corp.
Jumbo Mortgage Cons
●You will be required to demonstrate a higher annual income- Providing proof that you have a solid annual income and have substantial personal financial assets are needed because lenders are selective with jumbo loans.
●A solid credit score is needed- You can have trouble landing a jumbo mortgage loan if your credit score stands at 660 or lower. Putting down a larger payment, however, you can still be able to be approved a jumbo loan.
●Putting cash away on the reserve is also needed- If you close on your jumbo mortgage loan, putting away up to 12 months of mortgage payments aside is needed.
How to Land a Jumbo Mortgage Loan
There are many ways to get a jumbo mortgage but it is way more difficult than landing a conventional mortgage loan. And the reason for that is because the loan amount is larger that is why the lending standards are more stringent.
If you are disciplined and creative, getting a jumbo loan is doable.
●Check and boost your credit score- Robust credit score is needed to get s jumbo loan. 680 and up is preferred. You can check your credit score before you apply for a jumbo loan in this site for free (annualcreditport.com)
●Be prepared to demonstrate a cash reserve- If you can provide a proof that you’ve put away up to 12 months’ worth of mortgage payments in a cash reserve, your chances of getting a jumbo loan will increase. Having a bank savings account is the best way to do it. Just make sure that you have proof of the account when you apply for a jumbo loan.
●Your personal finances documents should be in order- Your tax returns, 90 days of bank statement and certificate of employment are what lenders want to see. Mortgage lenders will prioritize your household debt-to-income ratio for them to make sure you are capable after taking out a jumbo loan. If you have a lower DTI, the better lenders give 45% to borrower’s debt-to-income.
●Have your target home appraised- Having your preferred home appraised by a professional home appraiser to determine the current value of a property (by someone other than the seller) is needed and it may be required by lenders.
●Checking with multiple lenders to get multiple interest rate offer- Any money you can save on rates is a big deal since jumbo loan are larger than conventional loans.
Where Can You Get A Jumbo Loan?
Major banks and mortgage lenders like Citizen’s bank ( CFG- Get Report), Bank of America (MER-K), US bank (USB- Get Report), Quicken Loans and Lending Tree (TREE- Get Report) are examples of places where loan borrowers can find a jumbo loan.
When you try to have a jumbo loan on smaller banks and credit unions. You may just be wasting your time because you will not find it there not unless when you live in an area where home prices are high and jumbo loans are in big demand. If you go to larger financial institutions, they will likely offer you a better interest rate just to get your business done.
It is also a good place to start searching for a jumbo loan in your own bank. They will more likely approve you for a loan because they already know you than a bank or lender that doesn’t have a relationship with you. But if your financial institution doesn’t offer jumbo loans, they will refer you to one that does have a jumbo loan.
Cover Photo Credit: Guardhill Financial Group