What is a Jumbo loan?
Some homes are too expensive to utilize a standard loan program. Fortunately, many lenders offer Non-QM products called Jumbo loans that are backed by private investors and exceed the conventional conforming loan limits. There are several types of Jumbo loan products available in the market and all follow their own unique set of guidelines. They are offered by a wide range of financial institutions but not all lenders offer the same jumbo products so you may need to shop around to find the one that best fits your needs.
What are the general requirements to qualify for this type of loan?
Being that these can be riskier loans based on the higher loan amounts, qualifying requirements are stricter than conforming loans. You generally need a mid-fico score of at least 660 and a back-end debt-to-income ratio below 43%. Minimum down-payments can start as low as 10% depending on the product, property, and occupancy type. Reserve funds are almost always required as well. Because Jumbo loans are bigger and there are some extra qualifying steps, expect higher costs at the closing table.
What types of properties can I use this loan type on?
Most residential home purchases and refinances can use this type of loan. However, being that more expensive properties can be either unique or larger in size, there may some additional requirements to be met depending on the product. Ultimately there is an opportunity to use these loans on a wide range of property types as well as property purposes (i.e. primary, second home, investment)
Is there mortgage insurance for this type of loan?
A huge benefit to this type of loan is that it generally does not require mortgage insurance.
Who are these loans best suited for?
Although the general requirements are much stricter than most other types of mortgages, if you are in the market to purchase or refinance a home above the conforming loan limits these loans can be a great option. Those with good to great credit, stable income, low debt-to-income ratios, and a fair amount of funds available for cash-to-close and/or reserves can benefit greatly from these products.