Why do jumbo loans matter?

If you’re looking to buy or build a large home, you might be in need of a jumbo loan. At Mortgages By Jill, I can help you find out if this particular type of loan is right for you. Keep reading to learn more about jumbo loans and why they matter to you.

What’s a jumbo loan?

Mortgage loans that are larger than what is typical for the area and exceeds the limits set by the Federal Housing Finance Agency (FHFA). Because a jumbo loan is established by the local market, the limit loan will vary from state to state and there’s a maximum percentage that the loan can be used to finance your build. At Mortgages By Jill, I can help you get 95% financing and up to $3 million. Even with the financing limit, there is still a down payment required to qualify for your loan, which is typically about 20%.

Are lenders at risk?

The short answer is yes. Lenders are at tremendous risk with jumbo loans because they are not backed by Fannie Mae (FNMA) or Freddie Mac (FHLMC), which are government-sponsored organizations that provide security for lenders. Jumbo loans are not supported by these organizations because the limits are outside of limits that are insured.

Are interest rates higher?

Despite the tremendous risk for lenders, jumbo loan interest rates are not typically much higher than a traditional mortgage. In fact, if you have a high credit score you could qualify for a lower interest rate with a jumbo loan.

Are there special considerations for a jumbo loan?

Lenders might have different standards to qualify for a jumbo loan, but a few things to think about when considering a jumbo loan are:

• What do your cash reserves look like?
• Do you have a steady income?
• Are you prepared for underwriting?

Cash reserves

Remember, lenders are not insured by the FHFA with jumbo loans and are at risk of losing out on large amounts of money if you default on your loan. Before you qualify for a loan, your lender might want to see that you have large cash reserves so you can continue to pay on your loan should there be a change in your steady income. Six to 18 months of payments are typically what a lender might want to see in your account.

Consistent income

As with any loan, a lender is going to want to make sure that you have income and the ability to continually pay on your loan. While consistent income is necessary, those who aren’t considered high income (more than $200,000 a year in North Carolina) aren’t likely to qualify.

Manually underwritten

A lender who is providing you with a jumbo loan will want to take an in-depth look at your finances. This means they’ll go through your income, debts, property details, and assets with a fine-toothed comb. This can take time, which means securing your loan can take longer than usual.

Is there a minimum credit score to qualify?

You will need to have a very good credit score to qualify for a jumbo loan. A minimum credit score can vary from lender to lender, but a minimum score of 680 is typical. Additionally, lenders will want to see a low debt-to-income ratio that comes in at around 40%. This means that your bills account for about 40% of your monthly income.

Get a loan from Mortgages By Jill

If you’re in need of a jumbo loan, get in touch with the team at Mortgages By Jill. I can help you get the financing you need for your new home or commercial project. Give me a call at 336-740-9068 or send a message using my online contact form after business hours. I’ll be sure to get back to you.