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Finding a great home loan involves careful consideration of your needs, finances and history. We are here to guide you.

Jumbo Loans – Credit Score, Cash Reserves & Qualifying Factors

Trying to buy a house that costs a lot more than a typical home loan allows you to borrow? You may be in need of a jumbo loans. 

A jumbo loan is a mortgage specifically designed to finance a home that is too expensive for a regular conforming loan. A regular conforming loan does not exceed more than $48,350 in most counties. 

Any house that exceeds the local conforming loan limit set by the Federal Housing Finance Agency of the U.S requires a jumbo loan.

A jumbo loan is also called a non-conforming conventional mortgage. These loans are typically riskier because the lender is not protected from losses if the borrower defaults. You also need to know that jumbo loans are usually available on an adjustable-rate or fixed-rate and they come with different terms. 

What are the Common Qualifying Factors for a Jumbo Loan?

  • Since jumbo loans are larger and riskier for the lenders, the underwriting criteria are usually stricter. You’ll need the following to qualify for such loans.

Debt-to-Incom Ratio

  • When lending a jumbo loan, lenders will consider your debt-to-income ratio (DTI) to make sure that you do not become over-leveraged. The loan lender is usually more flexible if you can prove that you have large cash reserves. 

Some lenders have set a hard cap of 45% DTI which you must be aware of if you are going for this option.

Required Credit Score

A lender may require your FICO score to be higher than the typical 700. Sometimes they may even require it to be as high as 720 in order for you to be qualified for the loan.

Required Documentation for a Jumbo Loan

  • You’ll need extensive documentation if you want to prove that you have plentiful cash reserves. The documentation is typically more extensive compared to conforming loans.

When going for such a loan, you need to be prepared in advance. Be ready to provide your full tax returns, 1099s, and W-2s when applying for one. You will also be required to provide bank statements and information on any owned investment accounts.

Appraisals

  • Although most lenders are happy with one appraisal, others may not be satisfied and may require you to go through a second appraisal of the house you are buying.

What’s the Difference Between Jumbo Loans and Conforming Loans

The major difference between a jumbo mortgage and a conforming loan is the amount that can be borrowed. Here are some other differences that set the two apart from each other.

Higher Interest Rates

  • Jumbo mortgage rates are usually higher than conforming loans but this depends a lot on the lender and your current cash reserves. But the good news is that many lenders offer mortgage rates that are competitive with the conforming loan rates. 

Some lenders may even offer you slightly lower rates but that depends a lot on the market conditions. Just make sure to shop around with different lenders and see what options are available.

Bigger Down Payment

  • Conforming loans usually don’t have large down payment requirements but the same cannot be said about jumbo loans. A lender will require you to pay a down payment of at least 20% before you can get the loan.

Look around and talk to different lenders because some may even be willing to cut down the down payments to 10%.

Higher Closing Costs

Jumbo loans are far bigger than conforming loans so naturally, there are many more qualifying factors. You can expect to pay larger closing costs at the end of the deal.

What is the Loan Limit?

  • While the loan limits of conforming loans depend a lot on the real estate market and the county, as of 2019, the limit has been set at $484,350 for one-unit homes in nearly all counties. 

If the house you are buying is located in a high-cost area, the conforming loan limits reach up to $726,525 and higher in other places where the cost of a property is higher. 

How can we Help

Aceltis Group’s  Jumbo offerings go where other companies fall short. With common sense underwriting and multiple investor outlets, Aceltis provides options that are usually out of reach to ensure we’re providing the best home financing options in the marketplace.  

With over 15 years in the trenches, you can rest assured one of our professionals can provide you with an option that fits your home financing needs.


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