What is a Jumbo loan?
Another name for a jumbo mortgage is a non-conforming mortgage. This is a loan a lender makes you that doesn’t “conform” to the guidelines of Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac only buy mortgages meeting their guidelines for down payment, credit score, post-closing reserves, and loan amount. Starting in 2019, most Jumbo loans amounts will start at one dollar higher than $484,350.
Jumbo mortgages have the same overall qualifying methodology as a conforming loan. Lenders will look at credit score, down payment size, total monthly debt obligations relative to income (DTI), and money left over after closing.
Typically jumbo lenders want to see 6-12 months of reserves after the close, half liquid (in a checking or savings account), and half calculated from retirement assets. Reserve exceptions are available if your debt-to-income ratio is low and your down payment is high.
However, Jumbo loan approvals have some flexibility that conforming loans don’t have:
- Higher debt-to-income ratio. For most conforming loans with 20 percent down or greater, lenders will usually require that your total monthly housing payment plus all other monthly bills doesn’t exceed 43 percent of your income. But there can be some flexibility on non-conforming loans. For example, if you documented substantial cash reserves left over after the loan closed, you might be able to get a jumbo loan with a debt-to-income ratio higher than 43 percent.
- Flexible income calculations. Jumbo income calculations can be more logical than conforming. For example, if you were in the same industry for 15 years and recently started your own business in that industry, a conforming loan would require you to show two years of filed self-employed tax returns. A jumbo loan might only require one year of filed returns if you could document that the business was stable or growing.
- Less than 20 percent down with no mortgage insurance. Down payments on jumbo loans can be as little as 10 percent for loan amounts of $1 million and sometimes higher, translating into a $1.1 million purchase price or higher. Unlike conforming loans, these low-down jumbo programs don’t always require mortgage insurance.
Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our low rate guarantee!
Get Preapproved Today!
Disclaimer: The information contained in this article has been prepared by an independent third party and is distributed to consumers for educational purposes only. The information is considered reliable but not guaranteed to be accurate. The opinions expressed in this article do not represent the opinions of Finance of America. Please consult with a licensed loan officer for expert advice regarding financing or refinancing a home.