JUMBO LOANS

Jumbo loans

Jumbo loans are loans that are made in excess of the conforming loan limit of $417,000.  Therefore they are too big to be sold to Fannie Mae or Freddie Mac in the aftermarket.  In some areas that are more expensive that loan limit is capped at $625,000.  The upper limit was lowered to $625K from $729,750.  Most of the same criteria are assigned to jumbo loans as a regular loan they are just bigger.  Your credit score should be in the 700+ range but chances are you will get a good rate in exchange for borrowing a large amount of money.

Most lenders are looking for the borrower to be of high credit quality.  Jumbo loans are more risk for lenders mostly because of their size.  Lenders want a credit score of 660 - 700 but some will go down as low as 620 FICO, but after that you would have to go to a hard money jumbo lender.  A 20% down payment is typical but if the house gets into the multimillion dollar range don’t be surprised if they are asking for a 25% - 40% down payment.

As they examine your financials the debt to income ratio is typically caped off at 36% - 38%.  The underwriter will also want to see about a 10% debt coverage for the amount of the loan you are taking out.  For example:  If John Doe has a loan of $1,200,000 he will need to have cash saved or invested in stocks of $120,000.

The jumbo loan has terms much like that of a conventional loan; 30 Year, 25, 20, and 15.  Jumbo rates are currently about 4.5% for a 30 yr and 3.75% for a 15 yr.

RECAP

·         Loans of $417,000 or more ($625,000 in some areas)

·         20% down payment (NO PMI)

·         FICO of 660 + (700+) is better

·         Debt to income of 38% or less

·         Debt coverage of 10%

Michael Shea is a loan officer with Northeast Financial in Middletown CT.  Call Michael with questions or to apply for a Jumbo loan.  860-788-7237.