Purchasing a higher priced home may require a jumbo loan depending on where in the country the house is located. Typically, a conforming loan is limited to $484,350, except in certain areas where the average housing cost is higher.
If the home you are looking to purchase is outside of Fannie Mae and Freddie Mac’s guidelines, you will need what is called a jumbo mortgage. Jumbo home loans come have specific requirements and lending guidelines. A 30 year fixed jumbo mortgage will require a strong credit profile as well as a lower loan-to-value Ratio.
REQUIRED CREDIT FOR JUMBO HOME LOANS
A 30 year fixed jumbo mortgage is usually only available to consumers with a strong credit score around 680 or higher. A larger minimum down payment will also be required. These requirements are fairly standard between lenders, which makes it difficult for potential borrowers with a less than stellar credit history to obtain a 30 year fixed jumbo mortgage.
HOME VALUATION AND LOAN-TO-VALUE
As with any mortgage, a home appraisal will be required. The maximum loan amount available will be around 70% and sometimes as high as 80% of the appraised value. If you are looking to finance an expensive home, take the time to ensure that you will qualify for a jumbo mortgage before beginning the application process.
EXCEPTIONS TO THE RULE
In some areas where property values are much higher than the national averages, it is possible to obtain a conforming mortgage up to $726,525. The process required to obtain a non-conforming loan makes it worthwhile to check the conforming loan limits in your area before starting the process. Interest rates for jumbo or non-conforming loans can be as much as 20 to 25 basis points higher than conforming mortgages.
If you require a non-conforming jumbo mortgage, be prepared to have a higher down payment when purchasing a home. And don’t be shocked if you are offered a higher interest rate than what you hear on the radio. I prefer websites that don’t advertise generic rates.