This January, the new Qualified Mortgage Rule, went into effect. This rule makes it more dangerous for mortgage lenders to issue loans that may appear to be riskier because they would be liable if one of the loans is defaulted upon. Jumbo loans typically do not meet the QM rule which caused many borrowers and mortgage bankers to fear that the loans would no longer be available to borrowers. Fortunately, mortgage lenders have decided continue issuing jumbo loans and keep the money flowing.
The Qualified Mortgage rule requires lenders to assert that the borrower has the ability to repay the loan and outside of the box loan programs like interest only loans and jumbo loans do not fit the guidelines. Still, mortgage lenders like Wells Fargo have not changed their product offerings.
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If you own a home that is valued at over $417,000, or would like to buy one, you may find yourself in need of a jumbo loan. The only way to avoid this is to purchase a smaller home or come up with a large down payment. Fortunately, jumbo loans are available so that you have a lending solutions. Jumbo loans are any loan amount over $417,000 in most areas of the country. Super Jumbo loans can get into the eight figures.
Jumbo Loan Qualification Guidelines You Should Know
• Good Credit – Most mortgage lenders will define this as a 720 or higher FICO scorethough you may obtain a lower interest rate with a 740 or higher.
• Income History – The underwriter will evaluate your income history, how long you have been working somewhere, and the duration of you receiving your current salary. If you recently graduated from school, they will want to verify your schooling instead of job history.
• Down Payment – If you are purchasing a home using a jumbo loan you are likely to need a minimum of twenty percent down, while typically they charge 30 percent down.
• Cash Reserves – Your mortgage banker will verify your cash reserves. This is the money you have available to make the mortgage payment in the event that something happens with your job. It is an assurance to the mortgage lender in your financial security.
• Solid Appraisal – Lenders do not want to issue loans on the most expensive house in the neighborhood. If it is slightly more money that is one thing, but if your home is in a rural area where all of the others cost $300,000 and yours cost $1.1 million, it will be very difficult to get a home loan. The bank needs to know that if you default on your mortgage, and they have to take it back, that the home will be able to be sold on the open market.
Now is an excellent time to purchase a jumbo home loan. To get started contact your local mortgage lender, learn about the process, and how to obtain the right loan for your dream home.
