When it comes to your mortgage, there are so many different types of loans you can take out. Every loan is meant for different situations and they each have their own pros and cons that come with them. Due to home prices rising so much, one loan that people have had to start taking out more often is a jumbo loan. A jumbo loan is a loan that exceeds the dollar amount loan-servicing limits that have been put in place by the Federal Housing Finance Agency, or FHFA. These types of loans are meant to finance luxury properties or properties in highly competitive markets and each loan comes with unique underwriting requirements and tax implications. Jumbo mortgages have varying values depending on where in the country you’re located but most of the country has a limit of $484,250. There are a few areas within the country where the limits are much higher, as well as places outside of the continental United States such as Guam, Hawaii, and others.
Qualifying For A Jumbo Loan
If you’re trying to get one of these jumbo loans, the qualification process is a little stricter. These loans are often considered riskier loans due to not being supported by Fannie Mae or Freddie Mac, which givers them stricter underwriting guidelines. If you want to actually get approved for one of these loans, you’ll have quite the battle ahead of you. You’ll want to be sure to have a high credit score, 700 at the lowest but the higher you are, the better. Beyond that, your debt-to-income ratio should be around 36%. The final thing you’ll need in order to qualify is the ability to prove you have cash available to cover the mortgage payments that come with your new home. These payments will end up being rather large, and you usually need to show 30 days of pay stubs, W2 tax forms from the past two years, provable liquid assets, and at least six months of mortgage payments worth of cash put away. Finally, be sure to have proper documentation of any other loans you may have as well as proof of ownership for non-liquid assets.
Why Get This Loan?
You may be wondering why anyone would want to get a loan like this. The main reason is the ability to get the home of your choice without having to worry about the limitations put on a traditional mortgage. Fannie Mae and Freddie Mac have limitations on most loans, meaning it can be more difficult to get the home you want using those options.