Clarkston Mortgage Team

Jumbo Loan

Mortgage options refer to the various choices available to homebuyers when selecting a loan to finance their property purchase.

Jumbo Loan

You may need a mortgage to finance the purchase when you buy a new property. A jumbo mortgage can provide you the larger funds traditional loans do not cover — given that you can find a lender that offers one, satisfy the requirements, and afford the higher cost.

What Is a Jumbo Loan?

A jumbo loan, also known as a jumbo mortgage, is a type of financing that surpasses the Federal Housing Finance Agency (FHFA) set. Unlike conventional mortgages, a jumbo loan cannot be purchased, guaranteed, or securitized. Jumbo mortgages are designed to finance luxury properties and homes in highly competitive local real estate markets and have unique underwriting requirements and tax implications. These mortgages have gained traction as the housing market recovered following the Great Recession.

Qualifying for a Jumbo Loan

Underwriting criteria for jumbo loans are stricter because the loans are more extensive and riskier for lenders.

  • Credit score: Lenders may need your FICO score to be higher than 700, sometimes as high as 720, to be eligible for a jumbo loan.
  • Debt-to-income ratio: Lenders will also assess your debt-to-income ratio (DTI) to guarantee you don’t become over-leveraged. However, they may be more flexible if you have ample cash reserves. Some lenders have a hard cap of 45% DTI, however.
  • Documentation: To verify your financial health, you’ll need extensive documentation, possibly more than a conforming loan. It would help if you were ready to provide your complete tax returns, W-2s, and 1099s when applying, in addition to bank statements and details on any investment accounts.
  • Cash reserves: You’re more likely to qualify for a jumbo loan if you have enough money in your bank account. Lenders usually ask jumbo loan borrowers to show they have enough cash reserves to provide one year of mortgage payments.
  • Appraisals: Some lenders may mandate a second home appraisal for the property you plan to buy.

Why Use a Jumbo Loan?

If you want to buy a more expensive house than usual, a jumbo loan can help you get the financing you require. Jumbo loans aren’t just used to buy a primary residence; this type of loan is also popular for investment properties and vacation homes.

“Housing is a great investment. In general, the people getting jumbo loans are the most creditworthy, and the money being leveraged is being put back into their businesses,” says John Lynch, the CEO of PCMA.

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Click & Learn

Perfect credit
Eligibility criteria
Long processing time
You’re more likely to default
Unexpected Out-of-Pocket Costs

Perfect credit

Myth

You need perfect credit to be approved.

Fact

False. While the VA encourages approved lenders to provide VA loans to all qualified applicants, it does not describe a minimum credit score.

Eligibility criteria

Myth

Only combat veterans are eligible.

Fact

Veterans, active duty servicemembers, reservists, National Guard members, surviving spouses, and other individuals can earn eligibility for home loan benefits.

Long processing time

Myth

VA inspections and appraisals take too long.

Fact

The VA has streamlined and modernized inspections and appraisal processes in recent years, and closing times have come down to as low as 55 days.

You’re more likely to default

Myth

You’re more likely to default.

Fact

The too-good-to-be-true details of VA loans do raise the question: Is it really a good idea to give borrowers with poor credit scores mortgages with no money down? In fact, VA borrowers rarely default.

Unexpected Out-of-Pocket Costs

Myth

VA loans have unexpected out-of-pocket costs.

Fact

False. In fact, VA loans are known for their benefits, including no private mortgage insurance (PMI) and, in most cases, zero down payments.

Clarkston Mortgage

Many years of dedicated service have allowed us to play a crucial role in turning home aspirations into reality, always with a keen eye on keeping it within our customers' financial reach.
(248) 214-8526 info@clarkstonmortgage.com
1641 S. Milford Rd., STE C106
Highland, MI 48357
Company NMLS: #1862063
NMLS Consumer Access
NMLS #1862063 | Licensed In: MI, FL, CA, CO & TX
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Disclosure:
The content provided within this website is presented for information purposes only. This is not a commitment to lend or extend credit. Information and/or dates are subject to change without notice. All loans are subject to credit approval. Other restrictions may apply. Mortgage loans may be arranged through third party providers.
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