Have a Better Understanding About Jumbo Loans
Sometimes your dream home comes with a hefty price tag. That’s OK if you have the money to secure a mortgage, but you should know that if you’re planning to purchase a home at a certain price level, obtaining financing for it can be more complicated.
Cliffco Mortgage Bankers Can Help You Secure a Jumbo Loan
That’s because most home mortgages are underwritten by Fannie Mae and Freddie Mac, the government sponsored agencies that buy mortgages from lenders and guarantee the loans. But Fannie Mae and Freddie Mac limit their guarantees to $417,000 in most parts of the United States. So if you want a mortgage on a home with a higher price tag, you’re going to need another loan.
These loans for homes with larger price tags such as luxury homes are called Jumbo Loans. At Cliffco Mortgage Bankers, we help our clients purchase all kinds of homes with all types of loans. And we’ve certainly helped some of our clients buy property using Jumbo loans. Cliffco wants you to know all about your options, so we want you to know everything there is to know about Jumbo loans.
The Basics of Jumbo Loans
Because Jumbo mortgages aren’t underwritten by Fannie Mae and Freddie Mac, most borrowers should be prepared to pay slightly higher rates than conventional loans, according to NerdWallet. But more and more Jumbo loan lenders have come up with competitive rates or even slightly lower rates than conventional mortgages.
But one extra cost you can expect with a Jumbo loan is a higher down payment. NerdWallet says the minimum down payment you can expect for a Jumbo mortgage can range from 10 to 20 percent, You can also expect higher closing costs and fees because there are extra qualifying steps
Qualifying for a Jumbo Loan
According to Investopedia, you will likely have to undergo more stringent credit requirements because lenders are taking on more of a risk with Jumbo mortgages. They believe that you may have trouble getting approved for a Jumbo mortgage if your credit score is below the 700 to 720 range, although this may be changing, so you should check and see what’s available. You should also be prepared to prove your income by providing two years’ worth of tax documentation or similar paper work. You need to be able to show that you can cover at least six months’ worth of mortgage payments. In many cases, the debt to income ratio that would qualify you for a conventional mortgage will also suffice for a Jumbo mortgage. This usually needs to be 43 percent or less. But you should be aware that some lenders will ask for a lower ratio because of the size of the loan, according to Investopedia.
Because home prices are so high in relation to Jumbo loans, buyers need to understand that the IRS caps deductions on mortgage interest at $1 million, so if you take out a mortgage for more than that amount you won’t get a full deduction.
Cliffco Helps You Achieve the Dream of Home Ownership
Cliffco Mortgage Bankers is committed to helping you find the home you want and if you feel you want a high-end loan that might require taking out a Jumbo mortgage, we can help. Contact us today.