Jumbo Mortgage

Are you looking to increase the size of your home, so you and your family have more space and maybe more land? If you are, you may want to consider what is called a jumbo mortgage.

What is a Jumbo Mortgage?

A jumbo mortgage is a loan that is for an amount that is higher than $484,350. These loans have a few requirements that are stricter than regular loans. However, you no longer need to make a twenty percent down payment to qualify for one. Instead, you can get approved for a jumbo loan with as little as five or ten percent down.

Pros of a Jumbo Mortgage

• You will receive a larger loan amount that can have an excellent interest rate.
• The approval will be based on the amount you need to finance, the down payment you are making, and your credit score.
• This may be the best loan for you if you earn quite a bit of money and have excellent financial history, a high credit score, and a large down payment.
• It is possible to qualify with a credit score of 680.
• If your credit score is higher than 680, you may qualify to put down ten percent or less for a down payment.

Cons of a Jumbo Mortgage

• These loans are never guaranteed by the Federal Housing Administration or the Department of Veteran Affairs.
• If your credit score is less than 680 and you are approved, you will need to have a larger down payment ready to secure the loan.
• It is more difficult to qualify for this loan than it is a regular loan.
• Six months of mortgage payments must be set aside in a different account.
• If you require a loan over five million dollars, you will need to look into what is considered a super jumbo mortgage. These are often only given by portfolio lenders, so speak with your mortgage advisor to see who you must meet with.

Requirements for a Jumbo Mortgage

Income

Credit Score

You will need a minimum of 680 for a credit score or you will have a difficult time securing a jumbo loan.

Down Payment

In the past, you would have been required to put down 20% of the price you were paying for the home. However, since the jumbo mortgage has improved over the years, you may now only have to put down between 5 and 10%.

Cash Reserves

It is normally required that you have six months’ worth of mortgage payments in a checking or savings account.

Sales Price

The amount for most jumbo mortgages is $484,350 in most areas.

Length of Time for Jumbo Mortgage Approval

As long as you have handed in all the required information and documentation, you will normally have an approval or denial within two or three days. If something is missing, you should send it in immediately, as that will decrease your wait time.

What Type of Down Payment Should Be Set Aside?

Most jumbo mortgages are approved with as little as 5 to 10% down, so this is the bare minimum you should have set aside. You will also want to set aside the money you will need for closing fees, home inspection fees, and appraisal fees. If you really want to be on the safe side, save those amounts and 20% of the price of the home.

Interest Rates and Annual Percentage Rates

Is There a Penalty for Paying Off a Jumbo Mortgage Early?

It is always best to check with your lender to see if there is a penalty involved for paying your jumbo mortgage off early. While many contracts do not have a penalty, it is always best to check first then pay all those fees!

Jumbo Mortgage Myths Debunked

1. It will take forever for an approval The waiting times have been drastically reduced when it comes to approvals for jumbo mortgages now that it is all completed electronically.

2. Your credit score is the most important item of all the documentation While having a higher credit score is a plus for a jumbo mortgage, it is not the only thing that lenders look at. Having a lower score may not be an issue as long as everything else checks out.

3. There is a ton more paperwork to complete Yes, you may need a little more documentation for a jumbo mortgage, but the paperwork itself is basically the same as what you would fill out for a regular mortgage.

Handy Checklist for What is Needed for Applying for a Jumbo Mortgage

• 30 days’ worth of pay stubs
• 2 years of W2s
• 2 years of completed tax returns
• Driver’s License or Identification card like a passport
• Your most recent bank statement
• The purchase contract
• Any additional documentation requested by your lender

Once your lender has all your paperwork and documentation and you have been approved, you will receive a pre-approval letter in the mail. This letter will let you begin shopping for your new home, if you haven’t done so already. Most sellers prefer to see this letter, because it allows them to know that you have the approval to pay the amount they are asking for.