A jumbo loan, also known as a non-conforming loan, portfolio loan or non-agency loan, is a mortgage loan exceeding the conforming loan limits set by Freddie Mac and Fannie Mae, which vary by county or home type. The conventional loan limit is currently $453,100 for most of the U.S. with the exception of some higher cost locations in California, Florida and the North East. Some of these high costs locations have loan amount caps above $679,650. Please click here for the complete 2018 loan limit chart
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Jumbo loan options have evolved in recent years, as of 2018 qualified buyers have financing options up to 95% loan to value. Depending on the property state, 5% down options can be accomplished by doing a single 95% loan, or a “piggyback combo” 1st and 2nd mortgage. Both options allow borrowers to avoid paying monthly mortgage insurance(PMI) However, there are a few pros and cons with each.
90% & 95% “Single” Jumbo Loan:
Simple one loan process with reduced closing costs and paperwork since there is only one loan being processed. However, the interest rates can be higher on the single loan option. What financing options are available, and make the most financial sense will depend greatly on home buyers credit, property state, and loan amount.
80-10 & 80-15 PiggyBack Combo Loan:
Another option to consider is a conforming loan with a “piggyback second” loan to bridge the gap between the conforming and non-conforming amounts. In some cases, a homeowner can get a more affordable mortgage payment by taking out two loans simultaneously. One loan up to the maximum conforming limit (generally $453,100) and a second “piggyback” for the remaining balance. The second piggyback loan may have a higher interest rate and the overall closing costs can be slightly higher since there are two loans to process. However, in many cases, this option can be cheaper in the long-run than a straight single jumbo loan. One example of a 95% combo loan structure: John would like 95% financing on a $700,000 home in Phoenix Arizona. John’s first mortgage would be $453,100 (the max conforming loan limit in Maricopa County) The second mortgage would be for $211,900. The remaining 5% would be John’s down payment for $35,000.
2018 Jumbo Loan Requirements:
- Credit – Good credit is required, which should be at a minimum 700 or higher for the 5% down payment option. Buyers with 10% down payment must have a credit score above 660.
- Payment Reserves – Jumbo loan programs may require you to have a certain amount of payment reserves – the amount of assets you have available after your mortgage has closed and you have paid for your down payment and closing costs. As a general rule, one month of reserves should equal one mortgage payment, includes taxes, insurance, and any homeowners assessments. Jumbo loan reserve requirements may vary from 3 months of reserves to 12 + months of reserves depending on how high the loan amount is, in addition to the applicant’s credit profile.
- Documentation – Borrowers will need to document all income and assets in order to qualify for the Jumbo programs above. This includes (2) years of tax returns and/or W’2, plus bank statements to demonstrate sufficient assets.
- Property Use – The programs above only apply to primary residence and vacation homes. Financing is available for investor properties, but generally require an addition 15% down payment.
- Property Type – Subject property must be a single-family home, townhome or approved condo. Vacant land, acreage, manufactured, commercial, building on your own lot (construction to perm) financing not permitted. This does not include a new construction that is being built, initially financed and sold to you by a new home builder.
- Jumbo Loan Amount Limits – 95% financing limit is capped at $2,000,000 loan amount. 90% financing is capped to $3,000,000. Borrowers with 20% down payment have options well over $3,000,000, please contact us below for details.
- Loan Terms – The Jumbo programs above are available in a variety of fixed and adjustable rate terms. Adjustable rate mortgages often offer more attractive rates compared to jumbo fixed rate programs, making it one of the most common jumbo loan types.
- Mortgage Insurance – Whether it’s a single or combo loan, nearly all the Jumbo financing options do not require monthly mortgage insurance, or more commonly known as “PMI”
Special Program Notes:
Home buyers in/around Chicago have special 100% Jumbo Loan options here.
Eligible military veterans do have high balance VA Jumbo loan options available to them. Please read more about VA jumbo mortgages here.
All the options above apply to both Jumbo purchase and rate-term refinance options. Lower LTV cash-out refinance programs are also available to qualified homeowners. Learn more about the latest Jumbo Loan requirements here.
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