Are you searching for your dream home, but the price tag seems somewhat above your limit? Home prices have risen greatly in certain areas of the United States, so your desired home might require a mortgage through a jumbo loan. Jumbo loans are mortgages designed to finance properties that are too expensive for a conforming loan. Our loan specialists at Foundation Mortgage can work with you to understand your home purchasing needs and help determine if a jumbo loan is the best financing option for you if you are interested in buying a home in the areas of Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee.
What Is a Jumbo Loan?
A jumbo loan is a type of non-conforming loan, which means that it is too expensive for a conventional conforming loan. Government-Sponsored Entities, (GSEs), such as Fannie Mae and Freddie Mac, can purchase conforming conventional loans from lenders and sell them to other investors. These GSEs have a maximum loan limit, (usually $514, 000), and if the amount for a loan exceeds that loan limit, it is considered a non-conventional jumbo loan. Jumbo loans are oftentimes considered riskier for lenders because these loans aren’t insured through Government-Sponsored Entities, so the lender isn’t protected from loss in the case of a borrower default.
If you are looking for a luxury home, or a home that is notably more expensive than other homes in the community you are looking to purchase in, a jumbo loan may be your best financing option. Even though the interest rates on a jumbo loan are higher, you may be able to refinance your home later on. If you have adequate financial resources, a high credit score, and are able to make a substantial down payment, you could qualify for a jumbo loan. Although the qualification requirements are more stringent, Foundation Mortgage can help find you a great home in a high cost area and determine if you are eligible for jumbo mortgage financing.
Qualifications for a Jumbo Loan
Since jumbo loans are riskier for lenders, the underwriting criteria for the loans are stricter for borrowers. Some typical qualification guidelines when applying for a jumbo loan are:
- A credit score of 720 or higher
- A minimum down payment of 20%
- A low debt-to-income ratio (DTI), usually a DTI of 36% or lower is desired
- Proof of savings or liquid assets are often required as a safeguard against missed payments
- You must have the financial resources to afford higher interest rates and closing costs
- More than one home appraisal may be required to confirm property value
Purchasing a Home With a Jumbo Loan
If you have strong financial resources, and are looking for a luxury home, vacation home, or investment property that is located in a more costly area of Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, contact Foundation Mortgage to determine your qualifications for a jumbo loan. Our team will help you locate and finance your dream home, contact us today.