In the current housing market, many homes require financing that falls outside of the conventional conforming loan types. Jumbo loans are a mortgage loan type used for properties that lie outside the limits of conventional conforming loans. The current maximum amount for a conforming loan (such as conventional) varies by county, state, and lender but the current limit for most Counties is $548,000. For any home that lies outside of this limit, and requires financing, a jumbo loan will come into play. Jumbo loans can be used for primary homes, investment properties, and vacation homes.
Jumbo Loan Requirements
You’ve found the perfect home, but are in need of financing over $548,000. Do not fret! When you work with Future Home Loans, our brokers will search for the very best jumbo loan option for you.
You may have questions regarding jumbo loan interest rates, down payments, and credit score. Jumbo loans are seen as a higher “risk” to creditors, so there are higher interest rates and down payments involved. Typically, at today’s rates, the difference between conforming and nonconforming loans have a minimal difference. This could often mean a difference of thousands in terms of loan-life interest payments.
When it comes to down payment, a minimum of 10% down is required for jumbo loans. However, down payments are required based on your loan amount and credit score and can vary based on those two items.
In terms of credit score requirements, this is far different from conforming loans. As mentioned above, jumbo loans are seens as a higher risk to creditors with much more strict requirements. This doesn’t change when it comes to credit scores of borrowers looking into jumbo loans. Typically, a credit score of at least 700 is required, but there are programs that allow credit scores down to 640. The requirements of credit score go up depending on loan amount, and housing type (whether that be primary residence, investment properties, second residence, etc.).
Other requirements include assets in reserves, potential second appraisal, and a low debt-to-income ratio, among other things. It’s important to speak to a mortgage professional to determine if a jumbo loan is right for you and your financial situation.
Does The VA Offer Jumbo Loans?
In general terms, jumbo loans exist outside government-backed mortgage programs, with a single exception: the Veteran’s Administration. Yes, the VA offers jumbo loans to qualifying service members. In many cases, the only limit on VA loan type is based on lender risk tolerance. In fact the VA jumbo loan offers qualifying service members a huge benefit: the flagship $0 down. This means, in high metropolitan areas with higher than typical home values, VA loan qualifying individuals have increased access to homes in these areas, without the stress of the 10% minimum down payment on jumbo loans as required with a non-VA non-conforming jumbo loan.
Jumbo Loan Benefits
If you’re a homebuyer looking to purchase over the current conforming limits, jumbo loans are a true added benefit when needing financing. They allow you more financing access than potentially available with other loan types. There is also potentially more flexibility when it comes to jumbo loans and borrowers financing options. There are different varieties of jumbo loans, in return giving borrowers more flexibility in choosing a mortgage that works best for them and their financial needs. Some examples of jumbo loan flexibility include 30-year fixed rate or adjustable rate mortgage. If flexibility is what you’re looking for at a higher price point, jumbo loans may be right for you.
The 2021 year has seen increased housing prices with decreased interest rates. To say tha market is hot is an understatement. Working with an experienced mortgage broker puts you one step closer to your goals of home ownership. Future Home Loans has over 1,000 five-star online reviews from past clients, access to ample loan options and opportunities, and can offer you financing options to assist you in this hot market.
For more information on jumbo loans, watch our latest video featuring Cara Potter of Future Home Loans: https://www.youtube.com/watch?v=mbSsQd3b3P8