A jumbo mortgage is a home loan with a higher loan amount than the conforming loan limit set by Fannie Mae and Freddie Mac. In most counties in Illinois, any mortgage of more than $424,100 is considered a jumbo loan. In counties with higher home prices, the conforming loan limit is higher -- up to $636,150 as of Jan 30, 2017. In other words, they’re too large to be sold in the secondary market to government-backed agencies Fannie Mae and Freddie Mac and are considered “non-conforming”.
There are many benefits to a Jumbo Mortgage Loan, including:
- Extra borrowing power for larger or pricier homes
- Fixed and adjustable rate options
- The potential to combine a jumbo mortgage with a second mortgage, controlling costs
How do I qualify for a jumbo loan?
Qualifying for a jumbo mortgage is not as difficult as you think. Let’s start with the basics…
Basic Jumbo Qualification Parameters
- Down payment/equity: In most cases you must have 20 percent or more for a down payment on a home purchase transaction or have at least 20 percent equity in the home when refinancing. However, with a credit score of 740 and additional reserves, you can put as little as 10% down.
- Credit score: A 700 and above credit score is required for a home purchase or refinance.
- Debt to Income or DTI: For Primary Residences, 43% percent of your income can be used to pay your current total monthly debt for both a purchase or refinance (for secondary residences and cash-out refinances, your DTI cannot exceed 40%).
- Assets/Reserves: You must have assets to support a minimum of 3 months of payments for the new mortgage you are taking out and depending on the loan parameters up to 18 months may be required.
Okay. Let’s say I qualify for a jumbo loan. What kind of interest rate can I expect?
One of most positive aspects of a jumbo loan is the interest rate. Jumbo rates tend to be lower or at par with conforming loan rates due to the more stringent guidelines to acquire the loan. The lender feels more sure of the collateral. Therefore, it will keep its interest rates low to attract qualified borrowers. Also, jumbo loans offer arm products tied to Libor, the slowest moving average index for the past 20 years. Which means when your interest rate adjusts, you are likely to be at the same rate or lower over the life of the loan.
If you need more help with jumbo loans, go to newcastle.loans and ask to chat or speak with a jumbo loan specialist.