Residential home loans generally fall into one of three categories- conforming, conforming high balance and jumbo. Jumbo mortgages can also be called “non-conforming” because they don’t fall into the conforming loan limits set forth by both Fannie Mae and Freddie Mac.
The Federal Housing Finance Agency (FHFA) sets the standards that both Fannie and Freddie use to cap conforming loan limits for the following year. Each year, FHFA reviews data on the median home value for the entire country and compares that amount with the data for the previous year. If there is an increase from year over year, the conforming mortgage limit will be adjusted accordingly.
In areas where property values are much higher compared to most parts of the country, California for example, the conforming loan limit is raised to what is referred to as the “high balance” conforming loan limit.
Qualifying for a jumbo loan is very similar when compared to a regular conventional loan. Most lenders set their own set of qualifying guidelines as it relates to credit and down payment requirements. Modern Lending is proud to offer some of the lowest down payment jumbo options available today.
Credit requirements depend greatly on the buyer’s down payment amount. Most jumbo loan credit minimums start at 650 but can require 700+ credit for borrowers financing higher loan to values over 90%
Many of the jumbo programs today do not require mortgage insurance or PMI, even for those financing over 80% loan to value. However, just like conventional loans, buyers that put down 20% or more often see the lowest interest rates.
In addition to down payment funds and closing costs, jumbo loans also require “cash reserves.” Cash reserves are defined as the amount of savings a buyer has in “reserves” after their loan has funded. The mortgage payment includes principal and interest, property taxes and homeowner’s insurance.
Example: If the total PITI payment is $7,500 and the cash reserve is 6 months, there would need to be another $45,000 in documented assets. The good news is the payment reserve guidelines can often be met by non-liquid retirement accounts.
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Modern Lending is happy to serve all residents of California including Riverside County, Temecula.