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New Improvements to Jumbo Home Loan Program
Jumbo loans offer a unique opportunity for borrowers to buy luxury homes or refinance their existing large mortgage. Jumbo mortgage loans have a little stricter lending requirement than other programs but can still be the most affordable option. In most cases you can qualify to purchase or refinance a jumbo home (loan amount over the conventional loan limit of $453,100) with as little as 5% down. Yes, that’s right! 5% down, not the traditional 20%.
This is accomplished by establishing a 1st mortgage at the conventional loan limit of $453,100 and 2nd mortgage for the rest of the balance. This “combo loan” avoids mortgage insurance and usually offers the lowest fixed payment. The other option is to do one loan up to 95% LTV (also without mortgage insurance). Be sure to ask your mortgage professional which route would be best based on your situation.
A jumbo loan, or jumbo mortgage, is simply a mortgage loan amount that exceeds the amount lended in a conventional mortgage. This type of loan is often reserved for higher end properties and has differences in the underwriting process as well as tax differences.
What are the pros and cons of Jumbo loans?
Jumbo Loan Pros
Jumbo Loan Cons
This allows for larger loan amounts and in some cases even better interest rates. As well as some creative options are available to use a 2nd mortgage.
Not guaranteed by the Federal Housing Administration or the Department of Veteran Affairs
If you are a high income earner with a solid financial history, credit score and larger down payment this may be the right loan for you
Qualifying for a jumbo loan can be tougher than regular loans.
If you have a good credit score above 660 you will be more likely to qualify
If your credit score is below 660 you will likely have to put down a much larger down payment to offset the risk of a lower credit score.
You can get a Jumbo Loan with as little as 5% down in some cases if your credit score is higher than 660
You will need at least (6) months of mortgage payments in an asset account.
The total amount you want to finance, credit score, and your down payment will play a major role in whether you get financing. This is where The Moreira Team thrives at finding unique loan products and giving you access to specialty jumbo lenders to get you the loan you want.
If you are looking for a loan above $5 million you may have to look to a portfolio lender that offers super jumbo home loans. Be sure to consult with your licensed mortgage advisor for your best option.
For a more in depth understanding on what you need to get prepared for when applying for a lumbo loan check out our step by step guide “Simple Steps To A Jumbo Home Loan” ebook here.
Next steps after 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.
Typically, how long until a jumbo loan is approved?
Usually you can expect to wait from 2 -3 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 is the down payment on a jumbo loan?
20% down payments used to be common place for jumbo loans but that’s no longer the case. Today you can qualify for options with as little as 5% down so 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.
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 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.
Some myths about Jumbo loans
Myth 1 – You will have to wait too long for approval Paperless technology and advanced technology systems have reduced waiting times for approvals considerably. As long as your documentation is in order you will get the loan you deserve and there 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, it’s 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 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.