What you need to know about Jumbo Loans
Jumbo home loans offer a unique opportunity for borrowers to buy luxury homes or refinance their existing large mortgage. Jumbo mortgage loans have stricter lending requirements than other programs but can still be the most affordable in comparison to other loan products, In many cases you can qualify to purchase a jumbo home with as little as 10% – 15% down.
What are the pros and cons of Jumbo loans
For a more in depth understanding on what you need to get prepared for when applying for a Jumbo loan check out our step by step guide “Simple Steps To A Jumbo Home Loan” ebook here.
What are the next steps once you get pre-approved for a Jumbo Loan
Here are a few of the guidelines you have to meet for a Jumbo Mortgage:
- At least two years of employment with the same employer
- Consistent income over the past two years or trending upwards
- Previous bankruptcy requires that you have at least four years from a chapter 13 and six years from a chapter 7 with a good credit record without issues in that past period leading up to your loan application.
- A mortgage payment that equals roughly 43% of your gross revenue or less based on the purchase price of the home, your regular monthly bills, income and consumer debt with current interest rates.
How long should you expect to wait for a loan to be approved?
Usually you can expect to wait from 7 -10 business days. If further information or documentation which validates the accuracy of your approval is needed it may cause delays. The faster you provide accurate information the shorter your wait will be. The lender reviewing your profile will request an appraisal of the property, your credit report, verification of employment and financial history. To avoid delays make sure that you meet the lenders documentation requests promptly including your tax records being up to date.
What you need to set aside as a down payment
20% down payments are common place for Jumbo loans so you should expect this amount. Keep in mind your Mortgage Advisor will help you to determine what your upfront costs will be so you should consider the down payment, closing fees, appraisal fees and home inspection fees to be included in this amount. In some cases if you have an excellent credit rating, and strong financials there are options as low as 10% to 15% down.
What can I expect for the interest rate and Annual Percentage Rate?
Keep in mind that jumbo interest rates are often the same as conventional rates. That means even though you are borrowing more there are still low rate options available to you. Annual Percentage Rate is the total cost of ownership of the home and will always be unique to each borrower’s situation; This is why you need to speak with a Mortgage Advisor to help you work out the numbers.
There is no set number. The (APR) is determined by taking the total amount you are borrowing with all closing fees and spreading it out over the term of the loan. This is the true cost of your loan including the interest you are expected to pay over the amortization period of your loan, usually 30 years for Jumbo or Super jumbo loans. This is added up and broken down into a rate as a percentage.
Will you get penalized if you pay-off the mortgage to sooner
Make sure you check with your lender to insure there will be no penalties for paying your loan off sooner than expected. Don’t get caught with having to pay penalty fees on your loan. The Moreira Team believes that no loan should have a prepayment penalty for early payoff.
Let’s bust some myths about Jumbo loans
Myth 1 – You will have to wait too long for approval
Paperless technology and advanced technology systems have actually reduced waiting times for approvals considerably. As long as your documentation is in order you will get the loan you deserve and their should not be any adverse delays in the processing of your loan.
Myth 2 – Your credit score is all that matters
Jumbo lenders do focus one aspect of their approval on your FICO credit score but in reality its your financial stability and history that is the key factor to your approval. If you are consistent with paying your bills on time and show a positive history of payments your credit score will reflect this. Having stable work history and income is also a big factor in getting your loan approved fast. Obviously, if you show a pattern of late payments this may have a negative impact on your loan being approved.
Myth 3 – Expect more paperwork
In reality the documentation needed might be a bit different but is very similar to other loan applications with a lot of the same amount of documentation required.
So which is better for you? Fixed or Adjustable Rate Mortgages?
The easy answer here is that it depends on how long you expect to live in the home. Also the current interest rate patterns at the time of closing will dictate the rate you choose.
Have a look at our comparison chart in the Adjustable Mortgage Rates section and see what the best fit is for you and ask your licensed mortgage advisor for his professional advice based on your unique situation.