JUMBO LOANS
WHAT IS A JUMBO LOAN?
A jumbo loan is, essentially, another name for a non-conforming mortgage, which are loans that do not conform to requirements set by Freddie Mac, Fannie Mae, and/or the Federal Housing Agency. Jumbo loans usually require a higher down payment than conventional loans.
These loans exceed loan limits set by the government. If you are purchasing a property that calls for a loan higher than the local limit, this will be the only time you need to consider taking out a jumbo loan for a home. When a loan amount exceeds the acceptable limit to be considered ‘conforming’ to Fannie Mae and Freddie Mac guidelines, it is considered a Jumbo Loan.
WHO QUALIFIES?
Qualifying for a jumbo loan is very similar to qualifying for a conforming loan. Lenders take monthly income, monthly expenses, excess cash, and credit scores into account when deciding if a borrower qualifies.
Generally if your credit score sits at 700 or higher and you have 6 to 12 months in reserve, you will fit the requirements to qualify for a jumbo loan. For individuals looking to take out a jumbo loan, proof of a substantial income will also be necessary.
BENEFITS/TIPS
For real estate in more expensive markets, like New York City, Los Angeles, and San Francisco (and for more expensive homes), taking out a jumbo loan will assist in paying for these pricier properties. These loans also allow for more flexible loan terms, allowing the borrower to adjust the amount of time on the fixed-rate loan or change the mortgage to an adjustable rate.
One thing to keep in mind: these loans will naturally come with higher interest rates. Unlike safe conforming loans, jumbo loans come with additional risks. To qualify, a good credit history is essential, so double check all credit reports for any potential inaccuracies. In general, being accepted for a jumbo loan is difficult, so you must be able to prove that your income is high enough to be able to afford monthly mortgage payments.
It is also recommended to avoid investing in any other properties in Southern California if you have any lingering debt — be it from remaining college loans or medical bills — or you can anticipate a large expense coming quickly. Lenders want to know that you have the funds to pay off the loan, and that you will continue to do so for the life of the loan.
Feel free to contact LoanLeaders of America, Inc. today for any inquiries about jumbo loans!
Apply for a Jumbo Loan with us today!