Jumbo Mortgages: All You Need to Know
If you are looking at buying a luxury home valued over a half million dollars then you are likely going to need a Jumbo Mortgage. BerksLuxury.com is taking a look at Jumbo Mortgages to give you all the information you need to know!
To understand Jumbo Mortgages first we need to understand why they exist. Fannie Mae, which buy most bank and mortgage company’s home loans has a limit to the amount of the loan they will acquire. For most areas that number is $453,100 but in areas with higher home prices that number can go as high as $679,650. Depending on your area, any loan over the loan amount designated for that area is considered a Jumbo Mortgage.
Since Fannie Mae will not buy loans over that amount the banks are responsible for either holding the jumbo mortgage or finding investors to purchase the loans themselves. This means there is slightly greater risk for the banks and that they must tie up their own capital over longer periods of time.
As we all know with greater risk comes higher costs. Jumbo loans often have higher qualification standards such as higher interest rates, larger down payments, increased capital reserve requirements and higher credit score requirements to qualify. Often on jumbo mortgages banks can require two separate appraisals on the property as well.
Historically lenders have required 20% down, anywhere from .5% to 1% higher interest rates and a 700+ credit score to qualify for a jumbo mortgage. More recently banks have been leaning towards attracting high net worth clients and their banking business so recently it has been easier to find rates similar to existing FHA rates and with down payments as low as 5%.
“Wholesale lenders (lenders that work with brokers) have definitely noticed how competitive retail banks have gotten with jumbo mortgage rates. For banks it’s not just about providing their client with just a low interest rate. Like Joe DiRosa from BerksLuxury.com said, they want all of that high net worth individual’s business be it banking, retirement account, unsecured loans etc… Wholesale lenders have responded with not only low rates of their own, but also have adopted special programs to qualify self-employed individuals or W-2 earners who don’t fit the retail banks’ strict guidelines.”
Another aspect of qualifying for a Jumbo Mortgage is your capital reserves. Most conventional and FHA loans do not require capital reserves to qualify, but with Jumbo Mortgages lenders generally are looking for 6-24 months of capital reserves to approve the loan.
Today with all the lender options and the competitive loan programs buying a luxury home is easier today than it has likely ever been. Be financially responsible and do your homework but the terms offered in todays market are certainly favorable to consumers.
About the Author –
Joe DiRosa is the Founder, Publisher & Editor of BerksLuxury.com. I am an Entrepreneur, own several brands and web properties, and am a Licensed Real Estate Agent with RealtyTopia in Wyomissing PA. I have experience as a Mortgage Loan Officer and have been previously licensed as a Real Estate Agent in the State of New York as well.
If you have any questions or are looking for a property you can call me at 610-390-1331 or email me at Joe@BerksLuxury.com.