What You Need to Know About JUMBO Mortgages
Borrowers seeking large home loans today will find more lenders offering jumbo mortgages—loans for more than the 2018 conforming limits set by Fannie Mae and Freddie Mac, usually beginning at $453,100 for most parts of the country and reaching as high as $679,650 in some higher-priced real estate areas. With today’s historically low rate environment, borrowers will also be able to enjoy low interest rates. On the other hand, however, qualification requirements remain stringent because these loans are not insured by Fannie Mae and Freddie Mac, meaning the lender is responsible if the borrower defaults. Here are five factors to keep in mind if you’re trying to qualify for a jumbo mortgage.
1. Source of income
You must prove that you have the income and liquid reserves to cover the payments. Traditional borrowers will request pay stubs from the past 30 days and W2 tax forms from the past two years to prove income. Self-employed individuals should be prepared to show two years of tax returns and at least 60 days of bank statements. You also will need liquid assets to qualify: Come prepared with six months of reserves for the new mortgage payments. In the event that you don’t meet the basic criteria for “sources of income,” contact your local PERL loan officer who can help you navigate your next steps.
2. Debt-to-income limits
Many jumbo loans are considered qualified mortgages. This system was developed by the Consumer Financial Protection Bureau to standardize mortgage terms. Individuals applying for a qualified mortgage cannot have a debt-to-income ratio that exceeds 43 percent. If your debts push you over the limit, you still can apply for a non-qualified mortgage, but the lender will still need to verify you can comfortably repay the loan. PERL’s experienced loan officers can guide you through the loan process and help you secure a loan today.
3. Credit Scores
Due to the higher dollar value of these loans, credit score requirements also are higher for jumbo loan applicants. You’ll need at least a 680 credit score to qualify for most jumbo loans. However, all lenders set their own credit score requirements, and some lenders may require a higher score for approval. Contact your local PERL lender to see what credit score you need to qualify for any jumbo loans.
Qualified mortgage rules have increased the need for documentation. Borrowers will need to provide proof of income from all sources; proof of liquid assets; documentation on other loans held; and proof of ownership of non-liquid assets, such as additional owned properties. The majority of time spent during the mortgage process is in verifying the accuracy of all of the required documentation. That’s why PERL updates its clients during each milestone to make sure the loan is being processed in a timely and efficient manner.
5. Down payment
Although applying for a jumbo loan might be more difficult, borrowers can look forward to lower down payments. In the past, a 20 percent to 30 percent down payment would be needed for a jumbo loan. Today, only 10 percent is needed with excellent credit. But, remember, putting a smaller payment down upfront can affect your mortgage terms. Be sure to carefully review mortgage documents with your local lender.
As always, please remember that PERL will be happy to help with any of your lending needs. Contact your PERL Mortgage loan officer with any questions or to get started on your JUMBO loan today!