Jumbo Loans

Paying a mortgage every month can be hard, or impossible, even for buyers with the best laid plans. Life happens, the market changes, and sometimes homeowners simply aren’t able to make ends meet and end up close to or completely “upside down” on their mortgage — owing more than the home is worth. 

Jumbo loans are exactly what they sound like — large loans for expensive homes. They differ by amount from state to state and are not secured by Freddie Mac or Fannie Mae. In Salt Lake City, Utah, homes over $726,200 require a jumbo loan (this of course differs in areas of higher-cost homes). In San Francisco County, California, homes over $1,089,000 require a jumbo loan. For reference, if you hear the term non-conforming loan or non-conforming conventional loan — it’s the same as a jumbo loan. 
To qualify for a jumbo loan, buyers must have a low debt to income ratio (under 43% but aim for 36%) and a very high credit score (over 700). These loans also require all of the other loan requirements like proof of income and assets to cover payments, paystubs, etc. Sometimes, buyers must prove they have enough cash on hand to cover a year of mortgage payments. 

Down payments required for a jumbo loan used to be closer to 30% of the home price. Now, they are usually within the range of 10-15 percent of the home price but closer to 20% is always better. While APR (annual percentage rates) used to be higher for jumbo loans, recently they’re similar to the APR rates of conventional loans. Closing costs may be higher with a jumbo loan because there is more money on the table in the first place. 
If you’re in a position to purchase a high-dollar home and have the assets to do so — a jumbo loan is probably the right route for you and your lender can assure you of this. 

There are more loan types out there and Part 2 of this series will be coming soon, so stay tuned! If you need more information sooner — give us a call and we’ll get you set up!