If you have your eyes on a nice home, and hope to secure a large amount of financing, then obtaining a jumbo loan may be your best bet. Jumbo loans, as the name implies, are typically used to fund homes that are larger than what Fannie Mae and Freddie Mac set as the standard. These Government-Sponsored Entities (GSEs) have restrictions on the amount of financing that they will back. Today, Lucey Mortgage Corporation is here to tell Mount Pleasant, SC residents the ins and outs of jumbo loans.
Jumbo Loan Basics
A jumbo loan is also referred to as a non-conforming loan. The mortgage exceeds limits established by government agencies. Each year, the threshold for conforming loans is typically updated based on the median home price. Certain high-priced areas are allowed to have a higher limit. Jumbo loans will not be approved for government backing, and may be subject to higher interest rates.
You should also expect to pay a down payment of at least 10-20%. If you are not approved for a jumbo loan, then you may want to offer a larger down payment to bring the loan amount into conforming standards. You can attempt another loan program at this time. A lender may not want to risk loaning a very large amount that is not government-secured.
Securing a Jumbo Loan
A lender will scrutinize your ability to repay a jumbo loan. Typically, they look for a low debt-to-income ratio in a borrower. A high credit score will also help the process. You can expect to provide ample documentation of your ability to repay a large debt. The Federal housing Finance Agency is in charge of setting conforming loan rates. The current rate is $484,350 for a one-unit home. This limit will go up in higher cost housing areas. For this reason, jumbo loans are very common in expensive cities.
Many banks will want to see a credit score of 700 or above. They will also desire to see that you have large cash reserves. The home you buy may be subject to additional appraisals during the negotiation. In addition, you may have to get Private Mortgage Insurance (PMI) if you offer a down payment lower than 20%.
Jumbo Loan Rates
As discussed, you may have to start with a higher interest rate for a jumbo loan. You can request fixed-rate or adjustable-rate mortgages with this program. You may start with a higher interest rate and be able to refinance the home as you pay your debt down.
The professional staff at Lucey Mortgage Corporation in Mount Pleasant, SC are standing by to help answer your questions about jumbo loans. We look forward to guiding you during this important home buying process.