Jumbos Can Be A Beach
Your wife just fell in love with a beautiful house on Valentine’s Day.
“Honey I will love you forever!”
If your purchase requires a loan amount that exceeds the standard conforming loan limit ($484,350 per the Federal Housing Finance Agency), it will be considered a "jumbo loan", for which special rules may apply.
For example, if you prefer your down payment to be only 10%, your bank statements or retirement savings accounts may need to show additional liquidity in the amount of 12 months PITI (the projected monthly amount of your Principal, Interest, Taxes and Insurance).
And, you will need to address these questions:
- Is the loan for your primary residence?
[If not, there will be higher down payment, credit score, and reserve requirements for a second home or investment property]
- Is your credit score at least 680?
[If not, you may need to use a private lender, and your interest rate will be higher]
- Do you have enough reserves?
[If not, consider structuring a piggyback mortgage – that is, a conventional first mortgage up to the $484,350 maximum limit (so that the higher jumbo loan reserve requirements do not apply), and obtain a Home Equity Line of Credit for the balance]
- Is your Debt-to-Income ratio below 43% (40% if a 1st Time Homebuyer)?
[If not, you could increase your down payment (to lower your monthly PITI obligation), pay-off your car loan (to reduce your non-housing debt obligations), or negotiate an interest only structure (to eliminate your principal amortization)]
Here’s the Point: Jumbo loan rules can be discouraging, but there is usually a way to make it work.