When you are hoping to purchase a home for a larger amount of money requiring you to apply for a larger mortgage, a traditional conforming loan may not be enough. You may need to look into borrowing a jumbo loan.
For most real estate areas, a jumbo loan is needed for any property above the purchase price of $548,250. In some higher cost areas like many of those here in California, the jumbo loan price begins at $822,375. Early on in the pandemic it was hard to qualify for any type of loan especially a jumbo loan. As the real estate market showed that it was going to remain stable and thriving lenders have relaxed borrowing standards for their jumbo loan products. According to the Federal Reserve Board, the second quarter of 2021 became much easier to qualify for a jumbo mortgage product.
Though it is a bit easier to qualify for a jumbo loan right now, there are some things to be aware of with jumbo loan products to make sure it is the right step for you. Here are some things to keep in mind about jumbo loans before submitting a jumbo loan application.
A jumbo loan can carry a higher interest-rate than a conforming conventional loan
Jumbo loans are also referred to as non-conforming loans for the reason that they are not eligible to be federally backed by Fannie Mae and Freddie Mac. Since a lender does not have the federal backing for these loans, they are assuming a bit of a greater risk. For this reason, you may find that a jumbo loan comes at a higher interest rate. Currently the average 30-year mortgage rate is 3.024% for a 30-year fixed-rate conventional loan, a jumbo loan it is 3.066%. This is slightly higher than a conforming mortgage rate average, however it is not a huge increase, but is still something to be aware of.
A jumbo loan will require a larger down payment
Depending on the conventional mortgage you may be asked to put anywhere from 3 to 20% down on a traditional loan. The more money you put down on a conventional loan the higher chance you have of not paying private mortgage insurance, which can cost an extra couple of hundred dollars a month.
With a jumbo loan, it is most often required that you put down at least 20% of the home’s purchase price. Some lenders may require even more money be put down on the home since each lender sets their own complete set of qualification requirements. Jumbo loan requirements can vary greatly. It is a good idea to be prepared for a larger down payment requirement.
Larger amount of money in savings
Since the monthly payment on a jumbo mortgage is going to be significantly higher than that of a conventional conforming loan, it is not uncommon for a lender to require that the borrower of a jumbo loan can show they have at least one year’s worth of mortgage payments in their savings account.
Some tips on preparing for applying for a jumbo mortgage
Make sure to shop around with different lenders because lenders are able to have much more flexibility with their qualifying requirements. It is much more likely to find very different qualifiers and interest rates from each lender. The easiest way to shop around is to use an experienced mortgage broker in your area.
Know your credit score and make sure that you know your report is correct. Many people do not realize that something has been reported in error on their credit report causing their score to be a little bit lower than it should be. The higher your credit score the better chance of receiving the best rate and qualification for a jumbo loan
Go over your finances with a fine-tooth comb to make sure that the new mortgage payment will be well within your financial means
For more information on all mortgage products including your jumbo loans in Mission Viejo and California please contact me anytime.
For more information on jumbo loans in Mission Viejo and California please contact me anytime.
