Table of Contents
- What is a Jumbo Mortgage?
- Do You Need a Jumbo Mortgage?
- What Do You Do Next?
- Get Approved: Your Jumbo Loan Requirements Checklist
- Secure Your Dream Home with Confidence
Purchasing your dream home can feel like a monumental step, especially if its price exceeds the limits of conventional loans. If this is your situation, a jumbo mortgage, or jumbo home loan, might be the solution you need. This type of loan is designed for properties that require more financing than conventional lenders typically allow, and they often come with unique requirements.
Whether you’re a seasoned real estate investor, a business owner with non-traditional income, or someone with high-value assets, a jumbo mortgage might be your best option for securing the home you want.
In this guide, we will break down everything you need to know about jumbo mortgages, how they work, and how you can start your journey towards securing one.
What is a Jumbo Mortgage?
A jumbo mortgage is a home loan that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These limits vary depending on the area you live in, but for most of the U.S., the conforming loan limit is $806,500. In high-cost areas, like major metropolitan cities or counties, this limit can increase to as much as $1,209,750.
Jumbo loans are also known as non-conforming loans because they do not “conform” to the guidelines established by government-backed entities like Fannie Mae and Freddie Mac. As a result, jumbo loans carry more risk for lenders, which is why they tend to have stricter requirements for approval. They also tend to have higher interest rates and may require larger down payments compared to conventional loans.
Why Would You Need a Jumbo Mortgage?
There are several reasons why someone might need a jumbo mortgage. These include:
- Higher Property Values: If you’re purchasing a home in a high-cost area where property values exceed the conforming loan limit, a jumbo loan allows you to borrow more to cover the full cost.
- Unique Income Structures: If you have multiple streams of income from investments, self-employment, or stocks (including Restricted Stock Units or RSUs), a jumbo loan offers the flexibility you need.
- Large Investment Portfolios: If you own multiple investment properties, a jumbo loan can help you finance additional purchases.
Jumbo mortgages have become more common in recent years due to rising property values. As home prices increase, especially in high-demand areas like Los Angeles, New York, and San Francisco, more homebuyers are finding themselves in need of jumbo financing.
Do You Need a Jumbo Mortgage?
If you’re considering buying a high-value home or have a unique financial situation, you may be wondering if a jumbo mortgage is right for you. While jumbo loans are not for everyone, they can be an excellent option for certain types of buyers. Below are some signs that you might need a jumbo mortgage:
1. You’re Looking to Purchase a High-Value Home
- If the home you want to buy costs more than the conforming loan limit in your area, you will need a jumbo loan to finance it. In many markets, especially in urban or coastal areas, it’s increasingly common for buyers to require jumbo loans to afford their desired property.
2. You Have Complex Income Sources
- If you’re self-employed, own a business, or receive a significant portion of your income from stocks or investments (including RSUs), you may need a jumbo mortgage. These loans can accommodate buyers with complex income structures who may not fit into the traditional income verification models used by conventional lenders.
3. You Own Multiple Properties
- If you are a real estate investor or you have a growing portfolio of residential or commercial properties, you may require jumbo loans for additional property purchases. These loans can provide the flexibility to manage a variety of property types, from single-family homes to multi-million-dollar estates.
4. You Have Substantial Assets
- Jumbo mortgages often require significant cash reserves. If you have considerable liquid assets, investments, or other forms of wealth, you may qualify for a jumbo loan. Lenders will look at your total financial picture when considering your application.
5. You Want Personalized Mortgage Advice
- Jumbo mortgages aren’t a one-size-fits-all solution. If you’re looking for personalized service from a mortgage advisor who will work with you to develop a customized loan strategy, a jumbo loan might be your best bet. Since these loans involve larger amounts and often more complicated financial profiles, working with an experienced advisor is essential.
What Do You Do Next?
If you believe that a jumbo mortgage is the right choice for you, the next step is to speak with an expert who can guide you through the process. The jumbo mortgage landscape can be complex, but working with a knowledgeable mortgage broker can help you navigate the intricacies and secure the best possible loan terms for your unique situation.
Why You Need a Mortgage Expert for a Jumbo Loan
When dealing with jumbo loans, it’s essential to have an experienced team on your side. Jumbo mortgages come with specific requirements that differ from conventional loans, and working with a team that specializes in jumbo financing ensures that your loan is structured to fit your individual financial profile.
Here are just a few reasons why you should work with a mortgage expert when seeking a jumbo loan:
Negotiating Power: When dealing with high-value loans, having someone who can negotiate terms on your behalf is invaluable. A mortgage broker can help ensure you get the most favorable rates and terms possible.
Expert Analysis: Jumbo loans require a detailed understanding of your finances. Mortgage brokers who specialize in jumbo loans are experienced in analyzing complex income, assets, and financial documents to present the best case to lenders.
Access to Exclusive Lenders: Many jumbo loans are funded through private lenders or investors who offer unique terms. Mortgage brokers often have established relationships with these lenders, giving you access to loan options that may not be available through traditional banks.
Get Approved: Your Jumbo Loan Requirements Checklist
To secure a jumbo mortgage, you’ll need to meet certain criteria. Below is a checklist of the typical requirements for a jumbo loan:
1. Credit Score
- Lenders will typically require a credit score of at least 700, though some may require higher. Your credit history will be thoroughly reviewed to ensure you are a responsible borrower.
2. Debt-to-Income (DTI) Ratio
- For jumbo loans, your debt-to-income ratio (the percentage of your gross monthly income that goes toward paying debt) should ideally be below 43%. This helps lenders assess your ability to manage your monthly payments.
3. Cash Reserves
- Lenders want to see that you have enough cash reserves to cover several months of mortgage payments. The exact amount required can vary but expect to need six months’ worth of reserves or more.
4. Down Payment
- Down payments for jumbo loans are often larger than for conventional loans. While some lenders may allow a down payment of as little as 10%, most will require 20% or more.
5. Income Documentation
- Because jumbo loans involve more risk for lenders, you’ll need to provide detailed documentation of your income. This may include tax returns, W-2s, 1099s, bank statements, and other financial records. If your income comes from investments or other non-traditional sources, expect to provide additional documentation to verify these earnings.
6. Property Appraisal
- The property you are purchasing will need to be appraised, and for jumbo loans, this appraisal must demonstrate that the home is worth the loan amount you’re requesting. Sometimes, jumbo loans may even require two appraisals to verify the property value.
Secure Your Dream Home with Confidence
Navigating the world of jumbo mortgages can be challenging, especially if you’re unfamiliar with the process. But with the right team and the right information, you can secure the home of your dreams with confidence.
At Carlyle Financial, we’ve helped clients secure over $1.5 billion in jumbo loans, and we’re ready to help you, too. Whether you’re a seasoned real estate investor or a first-time homebuyer, we’re here to provide expert guidance and ensure that your jumbo mortgage process is seamless and stress-free.
If you’re ready to take the next step towards your dream home, contact one of our mortgage experts today. We’re here to provide the personalized service you need to make the best financial decision for your future.