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Why Choose A Jumbo Loan?
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Credit Score, Cash Flow, DTI and Other Financial Requirements for Jumbo Loans
Because jumbo loans occupy more of a niche market than traditional home loans, they have unique regulations and tax implications. Also, because these mortgages are considered higher risk, they have more rigorous underwriting procedures.
However, because they offer higher risk, jumbo loans can potentially offer higher benefits. For example, since lenders have more to gain from these loans, they can also afford more services to ensure the buyer’s financial safety. Another benefit is that you aren’t restricted by Fannie Mae or Freddie Mac.
Jumbo Mortgages: The Right Move if You’re in the Right Position
If you’re considering a jumbo loan, it’s important to remember that it is a major investment. As with any investment, there are risks to understand and evaluate in relation to your goals. Choosing to buy a house is a bold move.
What will aid you throughout your home search is learning how to eliminate unnecessary risk. That’s where mortgage brokers, real estate agents, and lenders can help you. Real estate agents, for example, can help you avoid property pitfalls. The right mortgage brokers and lenders will aid in reviewing your financial situation and connecting you with the right loan.
The bottom line is that buying a house is a major life decision. Many of our clients come to us with a conflicted outlook – excitement about a new chapter, but also worry and apprehension. Our lenders understand the loan process and work to make it as straightforward as possible. SouthStar Bank’s flexible common-sense lenders are here to help turn your dream home into reality.
Choosing Who You Borrow From Is Key
Not all borrowers are the same. A thorough evaluation of your goals and financial situation will ultimately lead to more favorable results. Quality lenders and mortgage bankers are not only versed in their knowledge but their overall practice of that knowledge. They can understand exactly what you are looking for and put you in the correct position according to your needs. What’s more, good mortgage lenders understand the importance of trust, and never take that trust for granted.
Frequently Asked Questions from Clients
The short answer: not usually. APR rates for these loans used to be higher than conforming mortgage rates, but they have evened out of late.
Reasons for Higher Rates
Jumbo APRs are occasionally higher due to a few factors:
- Who is lending the money
- Market conditions
- Borrower’s financial status
Note* Market conditions can also cause these mortgages’ APRs to be lower than conforming loans’.
Since these loans involve a greater sum of money, closing costs may also increase. Higher risk means there will be more qualifying factors than conforming loans. Since the underwriting will take longer and require more thorough review, you should discuss closing costs with your lender and account for a potentially higher expenditure come closing time.
You don’t have to be a millionaire to qualify for this type of mortgage. The most common candidates are in what has come to be known as the HENRY financial category, an acronym for “high earners, not rich yet.”
This category describes households who earn from $250,000 to $500,000 per year. A good tip to conceptualize whether you’re making enough money to afford a jumbo loan is whether or not you will make half the total cost of the house in a year.
If you are in the HENRY category, you may not have a substantial disposable income or accumulated assets. However, these borrowers do have enough money to sustainably qualify for a jumbo loan. If you’re in the HENRY category, it’s important to remember that determining whether you want to apply for a jumbo home loan is about more than how much money you make.
If you have great credit and a secure job with a lot of upward mobility, a jumbo loan might be ideal. On the other hand, if you have one great year, and you’re still trying to solidify your economic position and eliminate your debt, you’ll want to lower your DTI before jumping to any jumbo conclusions.
¹Must meet income restrictions.