A mortgage is considered a jumbo loan when the borrowed amount is more than $453,100, although that limit varies by state. Some states, such as California, have much higher loan limits because property values are higher than in other parts of the country. Due to rising home prices and a sustainable housing market, jumbo loans are becoming more and more popular. Because of our location and demographic, The Hargrave Group specializes in this loan type. Jumbo loans, because of their higher loan balance, have more stringent requirements than conventional or government loans, however, a jumbo loan can be obtained for as little as 10% down.
In addition to a slightly higher down payment requirement, jumbo loans will have higher reserve requirements and a lower debt-to-income-threshold. In most cases, the debt-to-income ratio cannot exceed 43% and the minimum reserve requirement will be 6 months of principle, interest, taxes, and insurance. Owning additional property other than a primary residence can increase the reserve requirement to include these additional properties. Jumbo loans require higher credit scores and interest rates are risk-based, similar to conventional loans. The higher a client’s credit score, the lower the interest rate will be. Jumbo loans will also direct more focus on the total credit profile and will have guidelines that address derogatory credit, such as bankruptcies, foreclosures, charge-offs, and late payments. Jumbo loan requirements are much less lenient than other loan types.
It is extremely important that candidates for jumbo loans work with a knowledgeable mortgage team and one that has access to many different investors and loan options.
Most banks only offer a couple options for jumbo clients, however, The Hargrave Group has access to more than a dozen investors, all with different requirements and guidelines. This is useful to jumbo loan clients because they often times have difficult profiles such as being self-employed, or having asset based income. Most larger banks simply lack the maneuverability that is offered by The Hargrave Group’s jumbo loan options.
Jumbo loans can also be used in conjunction with a renovation or construction loan. We commonly see clients who want to add square footage to an existing structure or even build piece of land. In addition to the purchase of the existing property, whether it be land or an actual home, jumbo loans are able to have the cost of construction added to the cost of acquisition. This allows the client to contain both the purchase price and the cost of construction under one low rate and down payment. These improvements can be structural, cosmetic, or both and range from a simple refresh of a home to complete construction. Jumbo Renovation loans have proved to be a great tool for homebuyers in such a fast moving, steadily rising market.
The Hargrave Group specializes in Jumbo Loans and has a long history of working with the wealth management firms, accountants, and attorneys that often times manage the portfolios of jumbo loan clients. Our knowledge and professionalism is appreciated by these third parties and helps ensure a quick and easy process for our jumbo loan clients.