Jumbo mortgage loans are defined as loans which exceed the maximum loan amount limits that are given by the Federal Housing Finance Agency and Fannie Mae and Freddie Mac. Jumbo loan rates are typically higher compared to those of conforming loans. These loans are utilized to buy high-end custom construction homes and more expensive and luxurious properties in the competitive local real estate markets. Unlike conventional loans, jumbo mortgage loans require a much higher down payment. In short, any loan that exceeds the conforming loan limit is categorized as an Arizona Jumbo mortgage loan. These loans have increased in popularity as the housing market continues to rise from the effects of the Great Recession.
It is imperative to note that the value of jumbo mortgage loans varies by state and even by county. The conforming loan limit is set by the FHFA and changes infrequently. The FHFA does this by state or counties depending on the particular markets and have special provisions for the regions outside the continental United States.
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How Jumbo Mortgage Loans Work
If you have decided to settle for a worthy home, let’s say half a million dollars or more, and you do not have such savings in a bank, you will require a jumbo loan. Getting one, however, is not a walk in the park as there are strict credit requirements compared to conventional loans. This is because jumbo loans have more credit risks for lenders as Freddie Mac or Fannie Mae do not insure them. More risk is also associated with large sums of money involved.
Just like the conventional mortgages, the minimum requirements for a jumbo mortgage have become stricter since 2008. For one to be approved for a jumbo loan, you will need a good credit score of 700 and above and a low debt-to-income ratio of fewer than 43%. Jumbo loans must lie within the guidelines of a qualified mortgage, which is a standardized lending system with rules and terms. Besides, you must prove you have accessible cash to cover the payments which can be high if you go for the typical 30-year fixed-rate mortgage. There are also specific reserves and income levels, which depend on the loan size. However, all borrowers are required to fill W2 tax forms and 30 days of pay stubs which stretch back two years. Self-employed individuals will require higher income requirements. All borrowers must provide clear documentation on all other loans they have held as well as proof of owning non-liquid assets such as real estate.
Types of Jumbo Mortgage Loans
The types of jumbo loans depend on the loan limits. For instance, the conforming loans are loans, which amount to $453,000 or less. Conforming Jumbo loans are loans with a limit greater than$453,000 and a slightly higher rate of interest than the conforming loans. Finally, the super conforming or agency loans are thos4e with loan limits exceeding $452,100 and can go up to $679,650. The upper limit is normally divided into two sections, the temporary high cost of $729,750 and the permanent high cost of $625,500. The super jumbos or the non-conforming loans are above the $729,750 limit.
The loan amount that you can get on a jumbo loan depends on the assets, property value, and the credit score. Contact one of our Arizona home mortgage specialists today to learn more.