95% jumbo loans are coming back to the St. Louis market, this is great for borrowers in high-cost areas that need to borrow more than the conforming loan limit.  These programs have certain conditions that the borrower must meet in order to get approved.

The amount of risk associated with the 5% down jumbo loans pretty high for lenders and banks, so proper documentation is key to loan approval.  Let’s take a look at some of the Jumbo loan guidelines buyers will need to meet in order to get approved.

If you are thinking about applying for the 95% Jumbo home loan in St. Louis, there are a few requirements that you need to consider before applying.

• Applicants need to have funding for at least 5 percent of the total price of the home, at the time of applying for this type of mortgage. You can even have 5 percent available in your refinance equity.
• You must document your income and assets via W2s and tax returns.  Debt-to-income ratios are generally limited to 35-40%.
• Buyers will need a strong 700+ credit score with no recent bankruptcy or foreclosure in the last 5 years.
• 95% jumbo financing is limited to $1.5m – $2,000,000. Much higher loan amounts are available for buyers that have 10% or more down payment.
• 95% financing is only available on primary homes – Single Family, town homes, and select condominiums.  Second homes, and vacation homes are also permitted with 5% down. Investment homes are permitted, but will require a minimum of 20% down.
• 95% Jumbo home loans are available in both adjustable rates and fixed rates.

Pros and Cons of Jumbo Mortgages for Homebuyers:

When it comes to purchasing a luxurious home, a standard mortgage might not cut it. Enter the jumbo mortgage—a loan designed for financing homes that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA). But is a jumbo mortgage the right choice for you? Let’s explore the pros and cons to help you make an informed decision.

Pros of Jumbo Mortgages:

Access to High-Value Properties

• Higher Loan Amounts: Jumbo mortgages allow you to borrow more money than conventional loans, making it possible to purchase more expensive homes.
• Luxury Living: For those eyeing high-end real estate in prime locations, a jumbo mortgage can be the gateway to luxury living.

Competitive Interest Rates

• Attractive Rates: Contrary to popular belief, jumbo mortgages can offer competitive interest rates, sometimes even lower than conventional loans.
• Fixed and Adjustable Rates: Borrowers have the flexibility to choose between fixed and adjustable-rate mortgage options, allowing for tailored financial planning.

No Private Mortgage Insurance (PMI)

• No PMI Requirement: Unlike conventional loans, jumbo mortgages often do not require private mortgage insurance, even if the down payment is less than 20%. This can result in significant savings over time.

Cons of Jumbo Mortgages:

Stricter Qualification Requirements

• High Credit Score: Lenders typically require a credit score of 680 or higher to qualify for a jumbo mortgage.
• Low Debt-to-Income Ratio: A low debt-to-income ratio is essential to demonstrate your ability to manage large loan payments.
• Significant Down Payment: Expect to make a down payment of at least 10%, although some lenders may offer slightly lower requirements.

Higher Financial Scrutiny

• Detailed Financial Documentation: Borrowers must provide extensive financial documentation, including tax returns, bank statements, and proof of assets.
• Reserve Requirements: Lenders may require you to have reserves equivalent to several months’ worth of mortgage payments to ensure financial stability.

Potential for Higher Costs

• Closing Costs: Due to the larger loan amounts, closing costs can be higher compared to conventional mortgages.
• Interest Rate Fluctuations: While interest rates can be competitive, they are also subject to market fluctuations, which can impact long-term affordability.

A jumbo mortgage can be an excellent option for homebuyers looking to finance high-value properties. With the potential for competitive interest rates and no PMI requirement, the benefits are appealing. However, the stricter qualification requirements and higher financial scrutiny could be challenging for some borrowers.

If you’re considering a jumbo mortgage, it’s crucial to weigh these pros and cons carefully. Ready to explore your mortgage options? Contact our team of experts today for a comprehensive consultation. Please learn more about Jumbo Home Loans here.  Five Stars also offers a variety of other home loan programs like Conventional, FHA, VA, and USDA.