Jumbo Home Loan Experts Folsom, CA
What Is A Jumbo Loan? A jumbo loan is considered any loan amount greater than the Fannie Mae or Freddie Mac high balance loan limit for a county. It is not insured by the government nor is it purchased by a Government Sponsored Enterprise like Fannie Mae or Freddie Mac. Although it is usually used by more stable and affluent borrowers, it is still considered a higher risk loan due to the lack of federal backing and the volatility of the luxury real estate market. Loan Amounts typically range from over the High Balance Limit up to $3 million for purchases. Higher loan amounts are available but not as common.
Where Does The Money Come From For A Jumbo Loan? Government backed and government sponsored enterprises have created liquidity in the market with FHA, VA, and Conventional Loans. There is no such thing in the jumbo market. Historically, jumbo loans have been backed by private institutional pools of money, hedge funds, and banks directly lending their deposits. For a period of time, around the mortgage meltdown, there was little appetite for the larger loan amounts. With the strengthening of the capital markets and appreciating real estate market, jumbo loans have had a resurgence with demand continuing to grow for jumbo loans.
Jumbo Loan Highlights: Each jumbo loan has its own guidelines which vary greatly from one lender to another. Based upon several lenders, we have put together the following highlights. These bullets should be considered separately and as a guide to what is available. Contact Iron Point Mortgage to determine what is available for your specific scenario.
- Loan Purpose: Purchase, Rate and Term Refinance and Cash-Out Refinance
- Loan Types: Owner Occupied, Second Home and Investment
- Loan Terms: You can get a jumbo loan as a Fixed Rate Mortgage or an Adjustable Rate Mortgage (ARM). Common terms are 15 and 30-Year for Fixed Rate and 5, 7, or 10 year fixed periods for ARMs which then adjust.
- Property Types: 1-4 Unit Residences, Condos, PUDs (townhomes and single family units in planned unit developments), properties with multiple parcels, rural properties, and some mixed use properties.
- Required Down Payment: As little as 10% down required on purchase of primary residence, 20% down on 2nd homes and 25% down on investments.
- Credit Requirements: Lenders typically require at least a 680 FICO Score. For increased loan amounts and LTV’s, lenders often require higher scores.
- Investment Properties: Permitted by many lenders for 1-unit properties, jumbo loans require larger down payments and more stringent guidelines.
- Who Is Eligible? US Citizens, Permanent Resident Aliens, Non-Permanent Resident Aliens, First Time Homeowners. Most jumbo loans do not permit foreign nationals, corporations, partnerships or trusts.
- Debt to Income Limitations: Acceptable DTI varies based upon Loan to Value, FICO Score, Loan Type and Occupancy. Max DTI is typically between 35% and 43% for most jumbo loans.
- Asset Requirements: Assets are required for closing costs, pre-paid items and reserves. While assets may be gifted, there is generally a minimum amount of a borrower’s own funds that they must bring in to the deal.
- Reserve Requirements: The need for available funds after the transaction is closed varies significantly from one jumbo loan to another. Whether it is a primary residence, 2nd home or investment property will impact whether 6 months of payments will be needed or 48 months.
- Gift Funds: Gifts from a family member are often permitted with jumbo loans, but you will generally need to bring 5%-10% of your own funds or put a greater amount toward your down-payment.
- Number of Financed Properties Permitted: Most jumbos permit multiple financed properties. While 4 is common, if it is the borrower’s primary residence, some lenders permit more.
- Foreclosure Seasoning: While some lenders are more stringent, most Jumbo loans require 7 years after foreclosure
- Short Sale Seasoning: Most lenders require 7 years after a short-sale
- Bankruptcy Seasoning: Typically a 7 year wait after a bankruptcy
What Are Loan Amounts For Jumbo? Jumbo Loan Amounts are different than conforming loan amounts in the sense that they are not based as much on the max amount as much as they are on the amount at which they start. A jumbo loan is typically a loan amount over the max high-balance conventional limit set by Fannie Mae or Freddie Mac annually. Max amounts vary, and are based upon the county where the subject property is located. Each year Fannie Mae puts this list of max loan limits together by county and publishes it to their website.
As an example, in Sacramento, the High Balance loan amount for 2015 is $474,950. Anything over $474,950 is considered a jumbo loan. If the property is located in San Francisco or Los Angeles Counties, the high balance loan limits for these counties are $625,500; anything over that amount is considered a jumbo in those counties. Check here for a full updated list of High Balance Loan Limits by county for California. Maximum Jumbo Loan Amounts are set by individual lenders according to their risk model and what they feel is acceptable.
What Are the Benefits of Using a Jumbo Loan? The main benefit of using a jumbo loan is that it’s a reasonable way to finance a luxury home. In higher priced areas, a High Balance Loan Limit may not be enough to purchase or refinance. As the economy continues to improve, jumbo lenders are providing very good rates with less money down than just a few years ago. Rather than purchasing with cash, it allows more affluent homebuyers to leverage their money into higher yielding investments while taking the interest tax deductions that real estate investments permit.
What Can a Jumbo Loan be Used For? Jumbo Loans can be used for purchase, refinance, and cash-out of residential properties from 1-4 units. Whether it is for a primary residence, 2nd Home or Investment property, amount of equity required by the owner, reserves in the bank after closing, and qualifying debt to income ratios vary.
Who Qualifies for a Jumbo Loan? Each lender has their own requirements and guidelines for qualification for a jumbo loan. Due to the fact that a jumbo loan is not based on a universal set of guidelines like a Conventional Loan or Government Loan, each lender has their own rules that must be met. Eligible borrowers typically include US Citizens, Non-Permanent Resident Aliens with unexpired Visas, Permanent Resident Aliens, and First Time Homeowners.
Ineligible Borrowers: Most jumbo lenders will not permit borrowers with Diplomatic Immunity, Limited Partnerships, General Partnerships, Corporations, Foreign Nationals, Individuals without a valid social security number, or Revocable Trusts.
Income Qualification for a Jumbo Loan? Due to the added risk that larger jumbo loan amounts mean to a lender, they may use more stringent income qualification guidelines. Longevity in a job generally means that income will continue. The lender is making the loan based upon a positive outlook that a borrower will be able to meet their financial obligations and pay the loan. Whether you are self-employed, an executive in a company, or in sales, your qualifying income will be based upon a two-year history of employment and an expectation that your income will continue. While base salary is used, variable income such as commission, overtime, bonuses, and self-employed income is averaged over a two year period. If your income is declining, then a lender will most likely use the most recent decline in income rather than the average.
Asset Qualification for a Jumbo Loan? Qualified assets are required for jumbo loans. These include down-payment, closing costs, prepaid items and reserves. Most jumbo loans will require a borrower to have a percentage of their own funds into the transaction rather than being fully gifted. Lenders want to see that a borrower has the ability to save, use their funds wisely, and carry their house payment in case income does not continue as expected for a period of time.
One of the main keys to qualifying assets is a clear paper-trail of where they came from. Any large deposit shown over the past two months must be explained, documented and verified. Normal assets include proceeds from the sale of real estate or personal property, cash value of life insurance, publicly traded stocks, bonds, mutual funds, Government Securities, Savings Bonds, recently received bonus income, retirement accounts, gift funds, qualified business funds, or funds in checking and savings.
Do I Need 20% Down for a Jumbo Loan? For many jumbo loans, it is not required to have 20% for the down-payment. In fact, as the Real Estate Market continues to strengthen, higher loans to value are becoming available. For certain loan amounts, jumbo loans are available up to 95% Loan to Value or just 5% of the sales price as a down-payment. Each loan has different parameters, so it is important to determine what is available for your purchase scenario.
Do I Need Mortgage Insurance? Jumbo Loans don’t require mortgage insurance when putting down 20% or more. Some jumbo loans permit less than 20% down without mortgage insurance, depending on the program. For those that do require it, private mortgage insurance is available through private mortgage insurance companies. It is typically available in Single Payment Up-Front, Monthly, and Split Payment, which is a combination of both.
Do I Need an Impound Account for a Jumbo Loan?
- What Properties are Eligible?
- Ineligible Properties:
- Terms Available:
- Fixed Rate Mortgage:
- Adjustable Rate Mortgage:
- Can I Use a Jumbo Loan to Buy Investment Property?
- How Many Borrowers Can Be On a Jumbo Loan?
- Can a Seller Pay Closing Costs?
- Maximum Seller Contribution to Closing Costs: