Jumbo Mortgages are mortgage loans that are higher than $548,250. Conforming mortgage loans are mortgage loan that conform to Fannie Mae and Freddie Mac Guidelines. Fannie Mae and Freddie Mac have caps on conforming loan limits and that cap is $548,250. Home buyers who are looking to finance higher than the $548,250 maximum conforming limit need to qualify for Jumbo Mortgages.
Jumbo Mortgage Loan Programs
There are variety of Jumbo Mortgage loan programs. Any mortgage loan that is higher than $548,250 is called a non-conforming mortgage loan, or Jumbo Mortgage unless the property is in a high cost area. Jumbo Mortgage loans are often viewed as riskier loans by lenders. Mortgage lending requirements on jumbo loans are tougher than conforming loans.
Jumbo Mortgage Eligibility Requirement
Most Jumbo Mortgage lenders do expect mortgage applicants with higher credit scores and lower debt to income ratios as well as larger down payments. Jumbo Mortgage lenders require 80% down payment on a home purchase and a minimum credit score of 680. There are Jumbo Mortgage loan programs which allow 85% to 90% loan to value with no private mortgage insurance required. Gustan Cho Associates offer 90% LTV jumbo mortgages with up to a 50% DTI and credit scores down to a 660 FICO.
Jumbo loans where borrowers do not have to pay annual mortgage insurance is called Lender Paid Mortgage Insurance, commonly referred as LPMI. The 10% down payment with no private mortgage insurance Jumbo Mortgage loan program does require a minimum credit score of 660 FICO and a debt to income ratio that cannot be greater than 50% debt to income ratios.
Jumbo mortgage loan applicants with prior bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale will have a rather difficult time qualifying for a Jumbo Mortgage. At best, there is at least a 7-year waiting period in order to qualify for a Jumbo Mortgage after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale. Jumbo loans one day out of bankruptcy and/or foreclosure are offered at Gustan Cho Associates with non-QM jumbo mortgages with a 30% down payment.
There are a few Jumbo Lenders that offer Jumbo Mortgages with borrowers with under 660 credit scores. However, debt-to-income ratios cannot exceed 40% DTI and compensating factors are required.
Jumbo Loan Basics
Under the eyes of mortgage lenders that specialize in Jumbo Mortgages, Jumbo Loans are considered risky:
- This because a higher end home cannot be liquidated as easily as a traditional average size home in the event the Jumbo Mortgage loan borrower defaults and the property is taken back by the mortgage lender via foreclosure
- It may take months or sometimes more than a year or two to resell a high end home or unique property whereas it only takes a fraction of that time to sell an average size home
- Due to this risk factor, Jumbo Mortgage lenders want strong borrowers and have higher credit standards with regards to down payment requirements, credit scores, income, and debt to income ratios
- A large down payment proves that the Jumbo Mortgage loan borrower has skin in the game
- A low debt to income ratio also provides less risk to the lender
- Reserves is a strong compensating factor.
Loan to Value and Jumbo Mortgages
Jumbo Mortgages under $1,000,000, standard down payment requirements is 80% loan to value. For best jumbo mortgage rates, a 75% loan to value is normally required. There are Jumbo Mortgage Lender that offer Jumbo Mortgage loan programs of 85% loan to value and 90% loan to values. Please note that the 90% loan to value Jumbo Mortgage loan program requires 660 credit scores and a maximum 50% debt to income ratio.
Super Jumbo Mortgage Loan Programs
Super Jumbo Mortgages are for higher end homes with minimum Jumbo Mortgage loan amounts of $3 million. There are no maximum loan amount on the Super Jumbo Mortgage Loan Program and no standard underwriting guidelines. Each Super Jumbo Mortgage Loan application is underwritten on a case-to-case scenario. Super Jumbo Mortgage Loans are all portfolio 30 year adjustable rate mortgage loans available as 3/1 ARM, 5/1 ARM, and 7/1 ARM.