What Is A Jumbo Loan?
A jumbo loan is a mortgage that is greater than a conforming loan in terms of how much is borrowed from the lender. Conforming loans usually have a limit that is set by the GSEs (Government Sponsored Entities).
Jumbo loans usually do not conform to the guidelines set by the GSEs (Fannie Mae and Freddie Mac). Since a lender like does not sell Boca Raton Jumbo Loans to or but instead holds these loans as investments, we set our own rules to determine eligibility and approval.
You must be wondering why anyone would want a jumbo loan when they can always go for a conforming loan. The answer is simple. Jumbo loans allow you to purchase homes that are more expensive.
Jumbo loans are especially helpful to borrowers who are unable to make a significant down payment for one reason or another on a property that is highly priced. It is not uncommon for borrowers to get a better interest rate on a jumbo loan than they would have on a conforming loan.
Minimum You Can Expect on a Jumbo Sized Mortgage
Jumbo loans are so named due to the amount of money they give access to. On the other hand conforming loans are referred to as such because they conform to the guidelines set by GSEs. In 2017, the maximum amount of money to be borrowed using conforming loans was set at $424,100. However, this amount was much higher for counties where the homes are highly priced. For instance, in Los Angeles County the maximum amount set by the GSE in 2017 was $636,150. In 2018, the limit set by Freddie Mac and Fannie Mae for Palm Beach County was $453,100. In 2019, this limit has increased to $484,350 due to rising home prices and other factors.
If you live in Boca Raton and are certain that the amount set by the GSEs is not sufficient, you should consider Boca Raton Jumbo loans.
Who Issues Jumbo Loans?
Two types of financial institutions offer jumbo loans:
- Private investors
Each of these has their own criteria that they use to determine who is eligible and who is not. Because of this jumbo loans vary from one lender to the next. Every jumbo loan is different.
Some lenders have specific requirements regarding down payments while others have very strict guidelines on getting a jumbo loan for their second homes.
To find out how to get Boca Raton jumbo loans get in touch with NHL Lending.
What You Need To Qualify for a Jumbo Mortgage
Because the lender is exposing themselves more to risk by lending you a large sum of money, more strict guidelines govern a jumbo loans qualification process.
Some of the requirements you will need to satisfy include:
A good credit score is a prerequisite for the borrower to be eligible for a jumbo loan. Most lenders will require a score that is as high as 700. In some cases, though there may be factors that would see a borrower qualify with a slightly lower score.
In order to qualify for a jumbo loan, most lenders require that the borrower makes a down payment that is 20% of the property value or more. Thankfully, this is not written in stone. Some lenders are willing to settle for a 10% down payment as long as the borrower has a very good credit score, substantial reserve assets, and a high income.
Evidence of Income and Assets
When applying for a jumbo loan, lenders will need to see evidence of your income as well as any assets you might own. They do this so that they can determine if you are capable of buying the property you are buying.
If you can prove that you have a consistent income, you will have a higher chance of your application going through.
Debt To Income Ratio
A debt to income ratio plays a key role in helping the lender determine how much of a jumbo loan the borrower can afford to service. Most lenders usually aim at a 43% debt to income ratio for their borrowers. They can shift their target if the borrower has substantial assets or is making substantial earnings from assets they own.
Jumbo Loan Rates
For the longest time, lenders set the bar very high for jumbo loans as a means of discouraging people from trying to borrow. This is because a significant amount of money is borrowed via jumbo loans, which means they expose lenders to great risk.
However, after the mortgage crisis of 2007, this view has certainly changed and jumbo loan borrowers are perceived as low-risk. For this reason, you might find that a lender offers a jumbo loan at a much lower interest rate compared to a conforming loan.
If you would like to know more about the criteria we use to qualify borrowers for Boca Raton Jumbo Loans, get in touch with NHL Lending.