Jumbo Loans are also called non-conforming loans due to the fact that they do not conform to Fannie Mae and Freddie Mac lending guidelines on maximum loan limits. Conventional loans, Freddie Mac and Freddie Mac, are conforming loans because they need to meet conventional loan lending guidelines set by Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are the two mortgage giants in the United States and sets its own lending guidelines and mortgage lenders who originate and fund conventional loans need to conform to these two mortgage giant lending guidelines if they want to sell the mortgage loans they originate and fund to Fannie Mae and Freddie Mac. Maximum conventional loan limits is $417,000 unless the property is located in a high cost area. Many counties in California is high cost areas and Fannie Mae and Freddie Mac have higher loan limits in high cost areas.
Lending Requirements On Jumbo Loans
Jumbo Mortgage Lenders have their own lending requirements on Jumbo Loans. Any mortgage loans higher than $417,000 loan amount is considered a Jumbo Loan. Most Jumbo Mortgage Lenders have their own lending guidelines with regards to credit scores, loan to value, and debt to income ratios. In general, most jumbo lenders require 20% down payment, 700 FICO credit scores, and debt to income ratios no greater than 40% DTI. Most jumbo lenders require at least a 7 year waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale from the mortgage loan applicant. Jumbo mortgage lenders also may require reserves from the jumbo mortgage loan applicant. Mortgage rates on Jumbo Loans are much higher than conventional loans. Normally, Jumbo Loans have mortgage rates that are 0.50% higher than conventional loans.
Specialty Jumbo Loans Offers
There are 15% down payment and 10% down payment Jumbo Loan Programs available. However, you need to realize that the higher the loan to value on a home purchase, the higher the risk on behalf of the mortgage lender, and with higher loan to value and higher risk means higher mortgage rates. To get the best jumbo mortgage rates, you need 25% down payment, 75% loan to value, and a 740 FICO credit score. You can qualify for a jumbo loan with 10% down payment and lower credit scores but you need to realize that your mortgage rates will be higher.
Alternatives To Jumbo Loans
If you are a home buyer that is interested in purchase a higher end home and need a jumbo loan, there are alternative to jumbo loans. You can get a FHA Loans and/or Conventional Loan up to the maximum loan limit and then get a second mortgage or Home Equity Line Of Credit ( HELOC ) from a bank up to 90% CLTV ( Cumultative Loan To Value ). For example, if you want to purchase a $600,000 home, you can get a first mortgage of $417,000 conventional loan. You would need a 10% down payment or $60,000 because most second mortgage lenders will require a loan to value no greater than 90% Loan To Value. The difference between $540,000 and $417,000 or $123,000 will be a second mortgage or HELOC from your second mortgage lender.
Second Mortgages And HELOC
Most first mortgage lenders do not originate and fund second mortgages and home equity lines of credit. However, you first mortgage lender will refer you to a second mortgage lender. Most second mortgage lenders are banks and they have their own lending guidelines on second mortgages and home equity lines of credit. In general, second mortgage lenders will require a minimum credit score of 680 FICO and may require at least a 7 year waiting period after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale. If you need a mortgage lender that specializes in alternatives to Jumbo Loans, contact Gustan Cho Associates at 262-716-8151 or email@example.com.