Jumbo Loan
Payments could be lower for the initial fixed term.
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What’s different about a Jumbo Loan compared to a
Conventional Loan?
Appraisals
Anyone that has purchased or refinanced a property knows that getting an appraisal can be a real problem. They take so long, and Appraisers are demanding rush fees and higher pricing and getting it! But Jumbo loans typically require two appraisals! But not all lenders do. That would be a good question to ask upfront before you commit to working with a mortgage professional.
Reserves
Well, the down payment is pretty much expected, big loans, big down payment. Now while that is true, and expected, what is also true yet seems to be unexpected is that lenders want to see that Jumbo borrowers have a decent amount of cash reserves. Doesn’t seem unreasonable after all.
Credit
If you have had a bumpy credit journey you might want to think twice about getting a jumbo loan. Lenders are lending a lot, so they expect pretty good credit. Unlike Conventional, and a big contrast to FHA or Non-Prime.
Jumbo Loan Guidelines
Requirements |
|
|---|---|
| Loan Amount | Jumbo loan amounts start where Conventional loans max out. This depends on the county. But in California for example, loan amounts go from $647,000 to $970,800 in the high-cost areas. |
| FICO Score | 700 – 720 |
| Debt to Income Ratio | When it comes to DTI, the lower the better, especially for a jumbo loan. Many lenders look for no higher than 43 percent and others will go right up to 50 percent. |
Qualifying For a Jumbo Mortgage:
Business / Employment
Whether you’re qualifying for a $500,000 mortgage or a $5 million mortgage, there is going to be a sizable monthly mortgage payment that the underwriter will want to be sure you can afford over a long period of time. It’s important to be thorough in explaining what you do for a living, the health of the industry, and the likelihood of continued employment. A company website, business licenses (self-employed), and other relevant information are important things to include with a loan application. Some underwriters may even search for your name or company on Google, so it’s smart to have an idea of what type of results and impression they’ll find if they choose to do some extra digging.
Assets
Documentation of assets is critical, and they have to make sense with the income stated on the application. For example, if the borrower states an income of $50,000 a month, then there should be sufficient assets and investments to back it up. If there are any large expenditures or deductions from checking accounts, make sure to have a paper trail or letter of explanation that clearly details the nature of the transaction.
Credit Scores
In addition to having high scores and proof of responsible borrowing history, underwriters may also look for other sizable debts that the borrower has had a positive experience managing or paying off. Public records and IRS issues will need to be thoroughly documented and explained.
Property
The landscape has changed for appraisals, so don’t be surprised if multiple appraisals are required for financing approval on the property.
Profiling
The overall borrower profile and supporting qualifying documentation have to make sense to an underwriter. Especially pertaining to the high net-worth world, the borrower’s lifestyle, assets, credit history, and income potential should follow a similar pattern to others who take on the liability of large mortgage debts. A good rule-of-thumb to keep in mind when trying to qualify for a non-conforming loan is to have your paperwork organized, as well as a good explanation prepared for anything that may raise potential questions by an underwriter about your ability to repay the mortgage over the term.
Typically, down payments for non-conforming loan amounts can be 20% or higher than the purchase price. Generally speaking, the larger the purchase price, the more money the borrower will have to bring as a down payment. Also, keep in mind that a Private Mortgage Insurance will be needed if the LTV is greater than 80%.
Frequently Asked Questions(FAQs)
Jumbo loans are one example of a conventional loan that does not meet Fannie Mae or Freddie Mac guidelines. A jumbo loan is a loan with a dollar value above the maximum loan amount established by Fannie or Freddie. Jumbo loans usually have a higher interest rate.
| County | GSE 1-unit limit | FHA 1-unit limit |
|---|---|---|
| Alameda | $1,089,200 | $1,089,200 |
| Alpine | $497,950 | $726,200 |
| Amador | $472,030 | $726,200 |
| Butte | $472,030 | $726,200 |
| Calaveras | $472,030 | $726,200 |
| Colusa | $472,030 | $726,200 |
| Contra Costa | $1,089,300 | $1,089,300 |
| Del Norte | $472,030 | $726,200 |
| El Dorado | $763,600 | $763,600 |
| Fresno | $472,300 | $726,200 |
| Glenn | $472,030 | $726,200 |
| Humboldt | $472,030 | $726,200 |
| Imperial | $472,030 | $726,200 |
| Inyo | $508,300 | $726,200 |
| Kern | $472,030 | $726,200 |
| Kings | $472,030 | $726,200 |
| Lake | $472,030 | $726,200 |
| Lassen | $472,030 | $726,200 |
| Los Angeles | $1,089,300 | $1,089,300 |
| Madera | $472,030 | $726,200 |
| Marin | $1,089,300 | $1,089,300 |
| Mariposa | $472,030 | $726,200 |
| Mendocino | $546,250 | $726,200 |
| Merced | $472,030 | $726,200 |
| Modoc | $472,030 | $726,200 |
| Mono | $693,450 | $726,200 |
| Monterey | $915,400 | $915,400 |
| Napa | $1,017,750 | $1,017,750 |
| Nevada | $644,000 | $726,200 |
| Orange | $1,089,300 | $1,089,300 |
| Placer | $763,600 | $763,600 |
| Plumas | $472,300 | $726,200 |
| Riverside | $644,000 | $726,200 |
| Sacramento | $763,600 | $763,600 |
| San Benito | $1,089,300 | $1,089,300 |
| San Bernardino | $644,000 | $726,200 |
| San Diego | $977,500 | $977,500 |
| San Francisco | $1,089,300 | $1,089,300 |
| San Joaquin | $656,650 | $726,200 |
| San Luis Obispo | $911,950 | $911,950 |
| San Mateo | $1,089,300 | $1,089,300 |
| Santa Barbara | $805,000 | $805,000 |
| Santa Clara | $1,089,300 | $1,089,300 |
| Santa Cruz | $1,080,300 | $1,080,300 |
| Shasta | $472,030 | $726,200 |
| Sierra | $472,030 | $726,200 |
| Siskiyou | $472,030 | $726,200 |
| Solano | $685,400 | $726,200 |
| Sonoma | $861,350 | $861,350 |
| Stanislaus | $517,500 | $726,200 |
| Sutter | $472,030 | $726,200 |
| Tehama | $472,030 | $726,200 |
| Trinity | $472,030 | $726,200 |
| Tulare | $472,030 | $726,200 |
| Tuolumne | $472,030 | $726,200 |
| Ventura | $948,750 | $948,750 |
| Yolo | $763,600 | $763,600 |
| Yuba | $472,030 | $726,200 |