About Jumbo Purchase Loans
A Jumbo Loan is a specific loan type tailored for borrowers whose mortgage terms would exceed the conforming limits set by Fannie Mae and Freddie Mac, and is one of the rarest of loan options. These conforming limits differ depending on where the property is being purchased. Jumbo Loans are basically for the borrowers who are purchasing a very expensive house relative to the location. Jumbo loans have higher requirements and restrictions due to the amount of risk for lenders. Most lenders will require a credit score of over 700 because credit-worthiness is very important to the lender for the approval process. Another area of large importance is the borrower’s ability to show that they can afford the home. While some loan programs require only a few months of reserves, some lenders may ask the borrower to show that they have the ability to pay for a year of mortgage payments. Lenders for Jumbo Loans need to be absolutely sure that the home buyer will not default on these loans, as these loans are more riskier than a regular Conventional Loan. Lenders will also require the usual documents that are typically required in other loan programs, which includes bank statements, pay stubs, W-2 forms and 1099 forms. Additionally, a lender may also request tax returns, 401Ks and other asset documentation.
Lenders typically require around 10 percent to 20 percent down for jumbo loans. While all lenders do not share the same requirements, most will only accept a down payment of 20 percent of the purchase price. There are a few lenders that may go as low at 10 percent, provided the borrower has a stellar credit history and will result in a very good debt-to-income ratio. Debt-to-income ratios, or DTI, will play a big factor in a borrower’s ability to be approved for a Jumbo Loan. Additionally, there are costs that may increase with Jumbo Loans. An example of these increased costs are closing costs and fees. Keep in mind that private mortgage insurance is not required on all Jumbo Loans, but it may be required by the lender if the down payment isn’t large enough. Like other loan types, these costs are usually rolled into the mortgage.
Jumbo Purchase Loan Requirements
The credit score requirement for this program is higher than the FHA Loan and USDA loan programs. We would recommend a borrower’s Credit Score for this program to be 680 or higher.
This program does not have income minimum requirements or limits. However, we’d recommend that a borrower’s income be enough to keep a debt to income ratio of 43 percent or less. As a program requirement, the debt to income ratio cannot exceed 43 percent.
This program does not have any location requirements prior to purchase of a property. Additionally, a property can be purchased in any condition.
The minimum down payment for Jumbo Loan programs is 5 percent, with this minimum being based on the credit score of the borrower. Most borrowers for this loan program do 20 percent down to avoid having to also purchase private mortgage insurance.