Most first-time homebuyers go for traditional mortgages when financing their home purchase. Their reasons vary, but is usually because of these are easy to qualify for, and rates are a good deal for them. However, for those fortunate enough to have a fat bank account, then you need to consider applying for what we call Jumbo Mortgages.
If you plan to buy a house in areas where home prices are high, then what you need is a jumbo mortgage. Here are some facts you need to before sending in your application for Jumbo Mortgage Texas.
Jumbo Mortgages Are Non-Conforming Loans
Conforming Loans are mortgages that meet the guidelines set by GSEs or Government Sponsored Enterprises like the Freddie Mac and Fannie Mae. Jumbo loans are non-conforming loans, which means they do not conform with Freddie Mac and Fannie Mae’s maximum loan limit, credit and down payment requirements, suitable properties and other factors. It also means you cannot sell Jumbo Mortgages to GSEs.
You Need To Have An Excellent Credit Standing To Qualify
Since the size of the loan you’re applying for is much larger than traditional mortgages, lenders will require to have excellent credit standing. This means you can’t qualify if you have a credit score lower than 650 and a credit report which shows poor payment history.
Most Lenders Will Require Two Home Appraisals Instead Of One
Most mortgage programs will only require one home appraisal. However, some will need you to have two appraisals by an independent agent to qualify. It may seem like an added expense, but on the bright side, it makes the property investment less risky on your part as well as to your lender.
Recommended Read: What You Need to Know About Home Appraisals
Debt-To-Income Ratio Of Below 36%
Most home loans require a good DTI ratio, but you can negotiate with your lender if you have compensating factors. However, taking out a jumbo loan means more risk for your lender; thus they will want to make sure you can repay them comfortably by having a Debt-To-Income Ratio that is lower than 36%.
Current Jumbo Mortgage Limits
You don’t need a home loan of at least a million dollar home for it to be a Jumbo Mortgage. While every state differs in jumbo mortgage loan limits, one is already considered a jumbo mortgage if it exceeds the loan limit set by Freddie Mac and Fannie Mae which is #453,100. Your jumbo mortgage limit will depend on where you plan on buying your home.
Down Payment Figures Dropped From 20% to 15% And 10%
Before, you need at last 20% down payment to qualify for jumbo home loans. Thankfully time has changed, and mortgage lenders now accept 10%-15% down. Like other mortgage types, you get to dodge Private Mortgage Insurance if you put down at least 20% down payment.
Many Consider Jumbo Mortgages As Home Loans For High-Income Earners
If you’re among the HENRY segment or High-Earners, Not Rich Yet, then jumbo mortgages are for you. If you make a considerable amount of money monthly but still hasn’t acquired millions in savings or assets, then you’re part of the HENRY.
Taking out a Jumbo Mortgage has its perks as well as drawbacks. Make sure to check if you can truly afford this type of mortgage and to consider other options before making a final decision.