Jumbo Mortgages are home mortgage loans that are higher than $647,200. Conforming mortgage loans are mortgage loans that conform to Fannie Mae and Freddie Mac Guidelines. Fannie Mae and Freddie Mac have caps on conforming loan limits and that cap is $647,200. Homebuyers who are looking to finance higher than the $647,200 maximum conforming limit need to qualify for Jumbo Mortgages. There are no set agency guidelines on Jumbo loans.
What Are the Lending Guidelines on Jumbo Mortgages?
Each individual Jumbo lender will set up their own mortgage guidelines on Jumbo loans. Lenders of Jumbo loans are portfolio lenders. A portfolio lender is a lender who keeps the loan in-house after it funds. Portfolio lenders can keep the loan in their fund or they may sell the loan to the secondary market with a specific investor. Each individual lender sets its own mortgage guidelines on loan to value, credit score requirements, rates, and terms.
Mortgage Options on Jumbo Mortgages
There is a variety of Jumbo Mortgages. Any mortgage loan that is higher than $647,200 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.
Qualifying for Jumbo Mortgages
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 an 80% down payment on a home purchase and a minimum credit score of 680. There are Jumbo Mortgage loan programs that 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 Mortgages With High Debt to Income Ratio
Jumbo loans where borrowers do not have to pay annual mortgage insurance are called Lender Paid Mortgage Insurance, commonly referred to 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 Mortgages After Bankruptcy
Jumbo mortgage loan applicants with a 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. Gustan Cho Associates has a non-QM Jumbo Mortgage Program for borrowers with credit scores down to 550 FICO. There are a few Traditional Jumbo Lenders that offer Jumbo Mortgages to borrowers with under 660 credit scores. However, debt-to-income ratios cannot exceed 40% DTI, and compensating factors are required.
Basics on Jumbo Mortgages
Under the eyes of mortgage lenders that specialize in Jumbo Mortgages, Jumbo Loans are considered risky. This is 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 regard 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. Reserve is a strong compensating factor.
Jumbo Mortgage Loan to Value Requirements
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 offers Jumbo Mortgage loan programs of 85% loan to value and 90% loan to value. 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 Loans
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 in 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.