July 17, 2017 by Leave a comment

Are you a Henry?

No—I’m not asking if your name is Henry, because chances are it’s not. I’m asking if you belong to a group of people classified as HENRYs (high earner, not rich yet)—people who make a lot of money but don’t have a lot saved. If you do, or even if you don’t, a jumbo loan may be perfect for your next home purchase.

A jumbo loan exceeds the thresholds, called conforming limits, that congress sets for the maximum loan size that Fannie Mae and Freddie Mac can purchase.

For the majority of the country, a jumbo loan exceeds the conforming limit of $424,100. However, in 227 high-income counties (such as New York City and San Francisco) the conforming limit is greater than $424,100 and can be as high $636,150. In Alaska, Guam, Hawaii and the U.S. Virgin Islands, congress has set an even higher threshold at $721,050. For information on the conforming limits in a specific county click here.

How Do Jumbo Loans Differ from Conforming Loans?

Jumbo loans are riskier for lenders than conforming loans because, since they are not insured by Fannie Mae and Freddie Mac, the lender is responsible for damages if the borrower defaults.

Therefore, jumbo loans have stricter requirements and require more paperwork. They may have slightly higher interest rates (though on average jumbo rates are on par with conforming rates), require a larger down payment, and have higher closing costs than conforming loans.

On the flip side, jumbo loans may not require private mortgage insurance for qualified borrowers. At Total Mortgage, private mortgage insurance is not necessary for loan-to-value ratios as high as 90% and down payments can be as low as 10% on jumbo loans.

Who Should Take Out a Jumbo Loan?

Jumbo loans are perfect for people who have a great credit score, low debt-to-income ratio, and a large income but not enough savings for a huge down payment or to finance a large home purchase in cash. If this sounds like you and you’re looking to purchase a luxury home, then a jumbo loan could be a great move.

What Types of Properties are Jumbo Loans Available For?

Jumbo loans are available for lots of different properties, including primary and secondary residencies, investment properties, and vacation houses. They are available in fixed and adjustable rate options.

How Do I Qualify for a Jumbo Loan?

To qualify for a jumbo loan you should have a great credit score (generally no lower than 680) and a low debt-to- income ratio (generally no higher than 43%). Additionally, you should have enough liquid cash reserves to show that you can cover at least 3 and up to 24 months of mortgage payments.

The underwriting process for jumbo loans is strict, so you should prepare to provide lots of documentation to your mortgage lender, including but not limited to: tax returns, W2s, bank statements, and 1099s. You may also be required to get a 2nd home appraisal.

If you’re interested in taking out a jumbo loan, Total Mortgage’s jumbo loan program offers all the finances, support, and information you need to purchase your luxury home.

Contact us today at 844-671-9947

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