Wondering what a Jumbo Loan is?
Elite Mortgage Source of Cape Coral, FL can help.
Jumbo loan also goes by the name of jumbo mortgage and is utilized when the loan limit exceeds the maximum amount set by the Federal Housing Finance Agency. Fannie Mae or Freddie Mac cannot purchase, guarantee or securitize jumbo loans unlike conventional loans.
These are targeted towards individuals interested in owning luxury properties. There are tax implications and underwriting requirements when going forward with a jumbo loan. The credit requirements are much rigorous for this than a conventional loan. To be approved for a jumbo loan, you must have very low debt-to-income ratio and perfect credit score. Down payments are generally 10-15% of the total price of the house.
How It Works
When choosing a house that’s half a million dollars or above and you don’t have a lot of savings, you would be taking out a jumbo mortgage to finance it. The background checks and credit score requirements are tougher than a regular conventional loan, so be prepared for that. The more rigorous checks are because these are not backed or insured by Fannie Mae or Freddie Mac and there is a higher risk attached to it along with the risk of more money being involved.
The credit score required needs to be 700 or above, and the debt-to-income ratio should be less than 43%, preferably somewhere close to 36%. Generally, people opt for the standard 30-year fixed-rate mortgage plan which has a high monthly payment and you need to ensure you have enough cash to cover your payments.
The requirements for self-employed individuals vary; you would need at least days of current bank statements and 2 years of tax returns. The borrower must be in possession of liquid assets and enough cash savings to pay for 6 months of payment along with providing documentation of any other loans they might have and non-liquid assets like other property.
Down Payment
Previously the requirements of the down payment were at least 30% of the property’s purchase price, but the requirements have eased recently. It is now 10% to 15% of the total price.
Should You Take Out a Jumbo Loan?
The amount you can borrow depends on factors like your income, credit score, savings, assets, and the property you are interested in purchasing. Jumbo mortgages are usually favored by people in the $250,000 to $500,000 per annum income bracket. These individuals are usually called high earners, not rich yet aka HENRY. These are people who make a lot of money but don’t have millions in savings or assets yet.
So even if someone in the HENRY bracket doesn’t have a lot of wealth in hand yet, they have a good credit score and stellar credit history than someone opting for a conventional mortgage. Banks love individuals like these because they would prefer one $3 million mortgage instead of 10 $300,000 loans. Banks also prefer to have them on board because they often need other wealth management services and having them affiliated with their bank for the long term means more business coming in.
Searching for a Local Jumbo Loan Mortgage Lender in Lee County?
Contact Elite Mortgage Source in Cape Coral ,FL in Lee County today to discuss the details for your jumbo loan and get started on owning your dream home.
