Are you in the market for a home and have your sights set on a higher-priced property? If the dream home you are looking for has an expensive cost or is located in a higher-priced neighborhood, you may want to look into financing the home with a jumbo loan. If you are looking to buy a luxury home in the areas of Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, Foundation Mortgage can help. Contact us today to learn more about financing your home with a jumbo loan.
Jumbo Loans: Essential Information
A jumbo loan is a mortgage that is too expensive to be classified as a conventional conforming loan, and therefore is considered a “non-conforming” loan. Fannie Mae and Freddie Mac are government-sponsored entities that purchase conforming loans from lenders and resell them to other investors, and they determine the dollar amount that constitutes a conventional conforming loan. The current conforming loan limit is set at $548,250, and if the loan a borrower needs exceeds that amount, then a non-conforming jumbo loan will be required in order to finance a home. Jumbo loans are riskier for lenders because they aren’t guaranteed a reimbursement if a borrower defaults on a loan, therefore, jumbo loans have strict application requirements.
Benefits of a Jumbo Loan
There are several benefits to obtaining a jumbo loan if you are able to meet the requirements. First of all, you will still be able to receive competitive interest rates and could have the option to refinance the mortgage for a better rate later on. With a jumbo loan, you are able to take out a high loan amount since the loan amount exceeds the Fannie Mae and Freddi Mac restrictions. With this type of loan, borrowers are able to purchase higher-end luxury homes, investment properties, or vacation homes, and private mortgage insurance is typically not required with a jumbo loan.
Jumbo Loan Requirements
The requirements for a jumbo loan are more stringent for borrowers because of the substantial amount of money involved and the amount of risk they pose to most lenders. The typical qualifications for applying for a jumbo loan include:
- A credit score of at least 700 or higher
- A considerable amount of cash reserves, (enough to cover several mortgage payments)
- A low debt-to-income ratio, (DTI), ideally 43% or lower
- Necessary financial documentation that proves evidence of your income, assets, tax documentation, etc.
- Private mortgage insurance will not be required if you pay a 20% down payment
Financing Your Dream Home With a Jumbo Loan
If you are in the market for a higher-priced luxury home, and need an additional financial boost to help you make the purchase with a jumbo loan, the loan specialists at Foundation Mortgage can help. If you are located in the areas of Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, contact our office today for a consultation.