Jumbo mortgage or non-conforming mortgage is a home loan with an amount exceeding conforming loan limits set by the two government-sponsored enterprises that purchase loans from lenders, including Fannie Mae and Freddie Mac.
So, what defines a conforming home loan? Home loans with amounts under the limits set by Fannie Mae and Freddie Mac are called conforming loans because they conform to the set standards. In all counties in Arizona, the limit on conforming loans for single-unit houses is $453,100. Jumbo mortgages are designed to provide financial options to people who want to buy a home above these conforming loan limits. If you are familiar with other states where housing is more expensive, like California for instance, the conforming loan limits may be higher. Since we are an Arizona Mortgage Broker, let’s keep the focus on Arizona guidelines.
You may begin your home search and not realize you may need to finance above $453,100 in Arizona. Sometimes, the cost of funds above $453,100 may make sense to you based on income, location, or the amount of assets you have.
These are common reasons why Arizona home buyers seek out Jumbo Mortgage Financing. However, with the variety of consumer goals, needs and wants in today’s real estate market, Jumbo Mortgage financing is not as easy as filling out an application and waiting for a rate quote.
Here are five tips from an Arizona Mortgage Broker about finding the BEST Jumbo Mortgage Financing for YOU:
Down Payment Requirements for a Jumbo Mortgage
There are many homes out there that are well above the normal value of the homes. This is not uncommon in some areas of the great state of Arizona. For instance, the media home price in Scottsdale, Arizona is $466,300 at the end of 2018.
After the Real Estate Crash of 2008, many home owners discovered Jumbo Mortgage Financing was difficult to be approved. However, in today’s mortgage market, there are several options to achieve your dream home.
In today’s market, we have 5%, 10%, 20% and more down payment options available. Each individual buyer profile is different. You may have great credit, solid income, however, you may not want to disturb your investment portfolio for a big down payment. Or, others, may have recently sold a house and have a significant down payment to put toward their dream house.
Did you know…Mortgage Brokers require additional licensing requirements and are independent, providing more choices for borrowers in Arizona? Make sure you are speaking with a licensed mortgage broker who works on your best interest.
Traditional Banks (think Wells Fargo, Bank of America, Chase) generally offer Jumbo Mortgages. However, they may require 20% down, or a minimum credit score of 720 for example.
Is putting 5% down a good option on a Jumbo Mortgage? This depends. The less down payment you provide, the higher the interest rate. Only applying 5% down makes sense for the high income earners, who maybe have limited liquid cash at the time of purchase, or do not want to disturb existing savings plans. This is not for everyone, and as mentioned, higher rates mean higher interest costs. Check with me if you want to learn more.
Jumbo Mortgage Advantage – less paperwork option:
There are down payment options which require less than the traditional offers and with lower credit scores. In Arizona for instance, we have a High Balance Jumbo Mortgage Advantage program for loans between $453,100 and $679,750. The underwriting is less restrictive and the opportunity to close within 30 days or less is available. Meanwhile, the rates available for this type of program are market competitive like conforming loan rates.
This particular program may require less assets for reserves and only requires 10% down. While mortgage insurance is generally required on conforming loans above 80% loan to value, this particular program has a mortgage insurance buyout. (Note, mortgage insurance buyout is for loans above 80% loan to value and there is usually a small premium adjustment to the rate).
Faster underwriting, easier guidelines, and very competitive rates. Min fico score of 680 is required.
Qualifying for a Jumbo Mortgage requires a higher credit score normally.
The high credit score is necessary because of how high a risk this loan is for a lender.
You will typically be able to secure this loan if your credit score is right around 700. However, as mentioned for programs like the Jumbo Mortgage Advantage above, there are lenders who will aggressively approve with lower than 700 credit scores. What’s the catch? The lower the credit score, the more down payment and the higher the rate. Remember, interest rate is not a one size fit all quote. Down payment, credit score, lender, mortgage broker, and loan program type all play a roll. Don’t be satisfied with the first quote you receive.
Keep in mind, if you think your credit score is lower than 700, and you are considering purchasing a home in the next 6-12 months, NOW is the time to start working on improving the score.
Review YOUR credit with Craig. Email firstname.lastname@example.org and ask today.
Jumbo Mortgage Types:
Many loans come with a lot of choices of the type and term that may be offered.
The three primary types of loans are interest only, fixed rate, and adjustable rate) and many terms that you can discuss with me.
The number of options means that even though Jumbo Mortgages are tougher to qualify for, you may be able to find the right loan for you today to fit your budget.
The interest only allows you to only pay the interest for a number of years and not touch the main amount of the loan. Some interest only programs allow for 40 year amortization with a 10 year interest only period. While there are risks with this type a program, an informed consumer may consider this as an option. Keep in mind, this program usually has a higher interest rate, which means your interest cost is higher. However, for individuals with variable income, it may be advantageous to pay a little more in interest and a lower monthly payment due to the interest only feature.
Fixed rate is the most stable and popular Jumbo Mortgage loan option.
You will not have fluctuations in what you will need to pay every month. Principle and interest is amortized over the term, and you will not have to worry about a rising mortgage rate market.
The adjustable rate mortgage is a very strategic loan. Usually, adjustable rate mortgages are fixed for a certain period of time. 3 year, 5 year, 7 year and 10 year adjustable rate mortgages are fixed for the period of time indicates “3 year ARM” -is fixed for 3 years and then adjusts thereafter.
The rate is changed by the lender based on terms spelled out in the promissory note. The ARM rider will list rate increase details. Check with your mortgage broker and see if they can explain the way an ARM works for you.
ARM loans can be more risky, however, if utilized properly, they can save you interest over a period of time based on YOUR goals.
How do I get the BEST Jumbo Mortgage Rate:
Because there is paperwork involved in trying to get a jumbo loan, you have to have a little bit of patience when it comes to this loan type. Some mortgage lenders have an extensive list of conditions and requirements.
To qualify for the BEST Jumbo Mortgage rate, you will want to have a great credit score (740 and above); a good down payment or equity position (at least 20% down/equity AND 40% or more improves your rate normally) and qualified income.
**If you are self employed and write off a lot of your income, contact me. I specialize in self employed income solutions.**
BONUS BEST MORTGAGE RATE TIP: As a local mortgage broker with over 23 years experience in the Phoenix, Arizona mortgage market, I can advise you fairly, with YOUR best interest in mind. In today’s market, the big institutions like Wells Fargo, Chase, Schwab and Bank of America (Merrill Lynch) own the Jumbo Mortgage Market with high net worth clients. They are able to underwrite and provide a preferred rate to these clients. As a mortgage broker, I do not have access to these great rate programs. If you have a banking relationship with one of the aforementioned, you may want to check with them first when it comes to the Jumbo Mortgage products with great credit, a lot of assets, and excellent credit.
Why would I advise you to check with another bank or institution? It’s simple. I am about saving clients money. Not all folks will qualify for the big institution preferred programs. Additionally, I have MORE options if you do not fit the box. I consistently compare my conforming rates and other programs to these institutions and have lower fees, rates, while providing more complete, faster service. There is a lot of business in Phoenix. I am here to advise and if I do it right, I’ll be YOUR first choice to review your goals every time.
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