Jumbo Loans Everything You Need To Know
Have you set your heart on a bigger house in an upscale neighborhood and wonder if a traditional home loan would be enough to cover your purchase? Well, there is an option for a Jumbo Loan that allows you to own your dream house and here you will learn about Jumbo Loans Everything You Need To Know.
Understanding the Jumbo Loan
As the name suggests, unlike regular conforming loans, a Jumbo Loan is a plus-size home loan that is made for homes above the conforming loan limits. A conforming loan is nothing but a mortgage that “conforms” to Fannie Mae and Freddie Mac requirements regarding loan size, credit, and debt requirements.
Generally, the maximum amount a person can borrow with a conventional loan is $453,100 (in 2018). However, if you have identified a house that costs more than this limit, a Jumbo Loan allows you to finance the entire amount up to $3,000,000.
How do Jumbo Loans work?
• Jumbo loans save the hassle of taking out multiple loans for a single purchase. Lenders understand that at times the limit set on the conventional home loans isn’t enough to purchase the desired property and hence they offer Jumbo Loans to such borrowers
• Although Jumbo Loans are more popular with financially strong, high-income earners, anyone meeting the eligibility criteria can apply for a Jumbo loan
• Considering the bigger ticket size, eligibility criteria for Jumbo Loans is a bit stricter as compared to conventional loans
Eligibility Criteria for Jumbo Loans
The eligibility for Jumbo Loans is based on the following factors –
• Credit score
Although the credit score criteria can vary between products we offer; in general, a score of 680 or more is desirable to be qualified for a Jumbo loan.
• Debt to income ratio
Another important factor in determining your eligibility for a Jumbo Loan is your debt to income ratio. Program guidelines want to ensure that you, as a borrower, have sufficient income/capability to repay the loan when considering all of your income and debts.
• Cash Reserves
The chances of a Jumbo loan approval enhances if the borrower has sufficient cash reserves in the bank. Lenders feel more comfortable in approving a jumbo loan if the borrower can show that they have enough cash reserves to cover mortgage payments for an extended period of time should the need arise.
• Documentation requirements
The documentation requirements for a Jumbo Loan are no different than the requirements for any of our other loan programs. The borrower should be prepared to provide a copy of their driver’s license, social security card, 2 years of tax returns, 30 days of pay stubs, and 60 days of bank statements.