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A Jumbo Loan is a very particular type of loan that is unlike any other conventional, as it’s designed for luxury properties in very competitive markets, which has big tax implications to take under consideration before making any decisions.
Should I qualify for a jumbo loan?
If you are aiming to purchase a home that costs around half a million dollars or more and you don’t have a big initial capital to afford it, a jumbo loan is perfect for you. However, get ready for much more rigorous requirements than in a conventional loan. Why’s that? The reason is because these are operations that involve a much higher risk for the lender, as there is a big amount of money involved and the risk increases.
Here are some of the minimum requirements: you’ re going to need to have a remarkable credit score that’s around 700 and above, as well as a low debt-to-income ratio(between 36%-43%).
Another common requirement is that you need to give proof of that you have cash on hand to afford the payments, which will probably be very high if you for example opt for a 30 year fixed-rate mortgage. Also remember, that for sure you’ll have to present 30 days of pay stubs and W2 tax Forms for the last two years.
In case you’re self-employed, the requirements will be even tougher, as you’ll have to proportionate two years of tax returns and at least 60 days of current bank statements. You’ll need to prove as well provable liquid assets and that you have enough cash reserves to afford 6 months of the mortgage payments.
Jumbo Loan Rates
But not all are bad news when it comes to the jumbo loans’ requirements, as the interest rates have been closing the gap to the conventional loans’ rates and nowadays they can be even lower.
Jumbo loans are often backed by other financial institutions; since these securities carry more risk, they trade at a yield premium to conventional securitized mortgages. However, this spread has been reduced, with the interest rate of the loans themselves.
What’s the down payment like in jumbo loans?
In the recent times, down payments have been going lower in jumbo loans, as it was used to be around a 30% of down payment and now it has fallen all the way down to 10% to 15%. A big reason for this, is that banks are always looking to find new customers that apply for jumbo loans, as jumbo loans borrowers are usually high profile individuals that institutions always love to sign up for long-term deals.
So, who should apply for Jumbo Loan?
As we mentioned in the beginning, these are very particular type of loans, which are made for high-income earners that make at least $150,000 to $500,000 a year but it all depends on how much monthly minimum payment debt a person is carrying and how much they have for reserves as well.
So that’s all for today, hope you found this article useful so far and don’t hesitate in reaching me out if you have any questions or need a consultation.
Stay hungry and stay positive!
Make it a great day,
Sean La Rue