Any home mortgage that is higher than the maximum conforming loan limit of $510,400 are called jumbo loans.
- Most high-end homebuyers will seek to qualify for a jumbo mortgage
- Jumbo mortgages are considered riskier loans by lenders
- The higher the risk a lender takes, the higher the interest rates and costs
- Jumbo loans have higher interest rates than government and/or conventional loans
- Traditional jumbo loans have tougher and higher credit standards than traditional government and/or conventional loans
- Jumbo lenders will require higher credit scores, lower debt to income ratios, and higher down payment requirements
- Most jumbo lenders will require six to twelve months of reserves
- One month’s of reserves is equivalent to one month’s principal, interest, taxes, insurance (P.I.T.I.)
- Most jumbo lenders will require a 720 or higher credit score
- Debt to income ratios is normally capped at 40% DTI
- Most jumbo lenders will require at least a seven year waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale
Capital Lending Network, Inc. has national wholesale lending partners on Jumbo loans.
Why Do Lenders Consider Jumbo Loans As Risky Loans
The best way to illustrate the risk on jumbo loans is by taking a case scenario.
- Mortgage lenders do not want to foreclose on any homes
- Lenders have the borrower’s home as collateral in the event the borrower default on their home mortgage
- The average home price today in $298,000
- In the event if a homeowner with a $298,000 home defaults on their mortgage and the property forecloses, it will be no problem for the lender to put the home on the market and sell it quickly
- $298,000 priced homes are in a major demand in today’s booming housing market
- However, let’s take an example of a $1 million dollar home
- Let’s say the homeowner of the $1 million dollar home defaults on their mortgage and the lender forecloses
- The key question is how long will it take to sell a one million dollar home
- Not too many people can afford a one million dollar home
- Many high-end homes are customized and may take a long time to sell
- It may take months and/or years to sell a high-end home
- There are many cases where higher end homes have sat on the market for many years
- Lenders are not real estate investors
- They do not want to hold inventory of properties
- Due to these risk factors, lenders are very careful when lending on jumbo loans
Capital Lending Network, Inc. has various types of jumbo loan programs.
General Mortgage Guidelines On Traditional Jumbo Loans
Depending on the lender, the lending guidelines on jumbo loans are different. However, we will generalize the lending guidelines borrowers will encounter when shopping for a jumbo loan.
Here are the general lending requirements most lenders expect from borrowers of jumbo loans:
- At least a 700 FICO score
- To get the best mortgage rates on jumbo loans, you would need a 760 credit score
- There will be a loan level pricing adjustments (LLPA) on the interest rates for borrowers under a 760 credit score
- 20% to 30% down payment
- The amount of down payment depends on the borrower’s credit scores
- From time to time, Capital Lending Network, Inc. has wholesale investors that will offer a 10% down payment jumbo mortgage for borrowers with a 740 credit score or higher
- Jumbo mortgages have higher mortgage rates than government and/or conventional loans
- The maximum debt to income ratios will cap at 43% DTI
- Reserves of six to twelve months
- The ability to repay will be scrutinized and reviewed carefully by the mortgage underwriter
- Lenders requiring two separate home appraisals is very common
- This holds true for multi-million dollar homes. Prior bankruptcies, foreclosures, deed in lieu of foreclosures, short sales need to be seasoned at least seven years
- Besides the borrower, the subject property will be carefully underwritten
- Emphasis will be placed on comparable sales as well as the cost approach
- Most jumbo loans take longer to process and underwrite
The average turnaround time to process, underwrite, and get a clear to close on a jumbo loan is 45 days.
VA Jumbo Loans
Any VA loan that is greater than $510,400 is referred to as VA Jumbo Loans.
- President Donald J. Trump has signed into law that VA Loans no longer have a maximum VA loan limit cap
- This is great news for homebuyers with a certificate of eligibility (COE) buying homes in high cost area
- VA loans are the best loan program in the nation
- However, only active and/or retired members of the U.S. Armed Services with a COE are eligible for VA loans
- VA loans has no minimum credit score requirement
- There is no maximum debt to income ratio caps on VA mortgages as long as the borrower gets an approve/eligible per automated underwriting system (AUS)
- There is no mortgage insurance requirement
- There is no down payment requirement and lenders offer 100% financing on VA loans
- Capital Lending Network, Inc. is a national mortgage company licensed in multiple states with no lender overlays on Jumbo VA Loans
CLN has a national five-star reputation of not having any lender overlays on government and conventional loans.
Conventional And FHA Jumbo Loans In High-Cost Areas
Many counties throughout the United States have higher home prices than the average county in the nation.
- These higher-cost counties are classified as high-cost areas
- Depending on the county, the FHA loan limit is higher in high-cost area than the $331,760 FHA loan limit
- FHA loans in these higher-cost area is often referred to a Jumbo FHA Loans
- This is due to the FHA loan limit being higher than the standard FHA loan limit of $331,760
- California has the largest number of high-cost counties out of any other state in the nation
- For example, the FHA loan limit for Los Angeles County, California for a single-family home is $765,600
- For a four-unit multi-family, the FHA loan limit in Los Angeles, California is $1,472,550
- Jumbo Conventional Loans are conventional loans with higher than the standard $510,400 maximum conforming loan limit
- For example, the conventional loan limits for Los Angeles County, California is $765,600 for a single-family home due to being in a high-cost area
- The maximum conventional loan limit for a four unit multi-family home in Los Angeles, County California is $1,472,550
Capital Lending Network, Inc. are experts in originating and closing Conventional, VA, and FHA Jumbo Mortgages in high-cost counties. CLN has no lender overlays on government and conforming jumbo loans.
Non-QM Jumbo Loans
Homebuyers who do not qualify for traditional jumbo loans can qualify for non-QM jumbo loans with credit scores as low as 620 FICO. CLN has a 10% down payment non-QM jumbo mortgage program for borrowers with at least a 720 credit score. Non-QM wholesale portfolio investors can make exceptions with their lending guidelines on a case by case scenario. The lower the borrower’s credit scores, the higher the down payment on non-QM jumbo loans. There is no maximum loan limit caps and no private mortgage insurance required. Mortgage rates are dependent on the borrower’s credit scores and the down payment.