Qualifications for jumbo mortgage

Jumbo mortgage rates are close to matching other loan rates in most markets. This is making bigger and high-end homes affordable and letting buyers stay within their budgets. Initially, buyers had to tap into their personal savings to have the large down payments needed to lower jumbo pricing. Fortunately, jumbo rates are now similar to conforming rates, making jumbo mortgages more cost effective.

What is a jumbo mortgage?

Jumbo mortgages are loans that are considered to be gigantic. They do surpass the conforming limit that the Fannie Mae and Freddie Mac can buy. In case you'd like to purchase a more expensive home, then you will probably require hard money jumbo loans.

The conforming limit will vary depending on the property’s location. Some housing markets consider a mortgage worth $ 417,000 and more to be jumbo. But, in the most expensive housing markets, the home loan needs to be as high as $700,000 or more to be considered as a jumbo mortgage.

Are you planning on buying a large house soon? Would you like to contemplate using a Jumbo mortgage? Below are jumbo mortgage basic factors and how you can qualify for a loan:

Credit Score

One essential criterion used to qualify buyers for a jumbo mortgage loan is an excellent credit score. Because you now need a larger loan compared to other types of mortgages, your lender will be harsher when checking your credit scores. Lenders don’t want to deal with a questionable borrower. Additionally, different lenders will have different minimum credit score limits that they work with. However, there is a general rule. You'll need a minimum credit rating of 640 to qualify for a jumbo mortgage.

To determine the credit score, your lender will consider three credit reports from key credit bureaus. Often, they will look at your middle score and use it as the credit rating. This means they will not use the best or worst score to determine the credit score.

Income

This is another important part of meeting the requirements of a jumbo mortgage. To qualify, you will need to show that you have sufficient liquid reserves and income that can cover the payments. Just like the credit score, the income requirements will vary from one lender to the other. Your lender has to look at your debt-income ratio and find out if you are a potential good borrower. You must have the capability to pay the principle, taxes, interest, and insurance comfortably so as to qualify.

Traditional borrowers require recent paystubs that date back thirty days as well as W2 tax forms that show your income for the past two years. Self-employed borrowers find the process more challenging compared to salaried borrowers. You'll need to provide tax returns for two years and bank statements of at least 60 days. You may also require liquid assets to qualify.

Down Payment

Although the application process might seem tougher, you will have one thing to look forward to- the down payments will not be set very high. In the past, one had to have 20%-30% down payment to get a jumbo loan, but today you only need 10% as long as you have good credit. In most cases, expect to have at least 5% of the property value as a down payment, but the rate will vary depending on your lender.