Funding for jumbo loans mainly stem from big banks. At times, they can be purchased by outside investors on the secondary market in secured assortments, plus lenders may also elect to maintain them for their own records.
Jumbo mortgages are prominently for luxury-home loans, and are generally more expensive to refinance due to closing costs being calculated as percentages of loan amounts. Also, in regards to luxury homes, valuation shifts tend to happen more frequently than lower-priced properties when market shifts occur.
These are riskier loans, which in-turn demand higher down payments and interest rates. Most lenders prefer a 20% down payment or a borrower to possess at least 20% equity upon refinancing. However, a 10% down payment can be deemed adequate by certain lenders. Borrowers can also expect to have their income records and credit history analyzed thoroughly by lenders. Credit score demands will vary by lender, but a 680 credit score is generally the average requirement needed for qualification.
Lenders want to verify if a borrower has the sufficient income and assets to repay this loan, thus they’ll likely ask for a borrower to provide pay stubs, bank statements, verification of liquid assets and W-2 forms from as far back as two years.
With most jumbo loans being “qualified mortgages”, it’s advised for borrowers to not have a debt-to-income ratio of more than 43%. In the event this limit is exceeded, borrowers may still be able to qualify for a non-qualified mortgage if a lender can verify the loan can be properly repaid.
Jumbo loans are permitted to be utilized for single-family and multi-unit buildings of a maximum of four units. Borrowers can buy an existing property or construct new housing. Investment properties and second homes can also be used via jumbo loans, however, obtaining funding for those projects are additionally more challenging for borrowers.
Mortgages can be fixed or at an adjustable rate, with 15 or 30-year repayment periods being standard. Fixed-rate mortgages are the most popular, as they possess a simple and more streamlined approach for borrowers to comprehend. Payments on the principal balance and interest are established as monthly installments, which will remain unchanged through the course of repayment.
Adjustable-rate mortgages (ARMs) will present borrowers with smaller initial installments when repaying the loan than fixed-rates. However, while this mortgage option is great for short-term, installments can increase significantly as the repayment term wears on due to its market condition-based rate.
Jumbo loans are one of the many financing options we at Stonebriar Mortgage excel in! Contact us today at (214) 669-3307 so we can assist you with your jumbo loan inquiries in Dallas!