Jumbo Loans And The Types Of Jumbo Mortgages

by Gustan Cho

Jumbo Loans

by martyna
This article is about Jumbo Loans And The Types Of Jumbo Mortgages for homebuyers of higher-priced homes. The booming home prices nationwide have many homebuyers priced out of the housing market on government and conventional loans. Government and Conventional loan programs have maximum loan limits. The skyrocketing home prices are exceeding many folks going well over the maximum loan limits on government and conventional loans. Any loan balance higher than the $548,250 conforming loan limit is called a jumbo loan. Mortgage guidelines for jumbo mortgages are different than government and conventional loans. Jumbo home loans are portfolio loans. Lending requirements on jumbo loans depend on the lender. Every lender of jumbo loans has its own lending requirements for its jumbo mortgage program. Gustan Cho Associates dba Capital Lending Network, Inc. has dozens of lending partnerships with wholesale lenders including specialty jumbo lenders. We will discuss and cover the various jumbo loan programs we have to offer to homebuyers of higher-priced homes. Due to skyrocketing home prices, jumbo mortgages are becoming very popular for homebuyers.

What Are Jumbo Loans? Jumbo Mortgage Loans Explained

What Are Jumbo Loans?

Jumbo mortgage loans are home loans that are larger than the conforming loan limit of $548,250.  Lenders of jumbo mortgage loans have higher lending standards than government and/or conventional loans. Jumbo mortgages are considered riskier loans than conforming loans. It takes substantially longer to sell a higher-priced property than a traditional home with an average price in the event the lender forecloses on the borrower. Some higher-priced homes can take many months or years to liquidate. Due to the layered risk levels of the collateral, lenders will have higher lending guidelines for borrowers of jumbo loans.  There are no federal government agencies or GSEs backing jumbo mortgages. There is more emphasis targeted on the property with jumbo mortgages. Lenders want to know a lot more about the property if the home is a higher-end custom home. The higher the price of the home is, the greater risks the collateral poses to the lender. Many lenders may require two appraisals on a jumbo loan.  The higher the risk, the higher the rewards. This holds true on jumbo loans. Therefore, mortgage rates on jumbo home loans are substantially higher than government and/or conventional loans. Lenders will require higher lending standards including higher credit scores, and larger down payments on jumbo mortgages. Jumbo loans are commonly referred to as non-conforming loans because they exceed the conforming loan limits.  Lenders may keep the jumbo mortgages they fund or sell them on the secondary market to larger banks, institutional investors, hedge funds, or other financial institutions.

FHA And VA High-Balance Jumbo Mortgages

FHA and VA loans offer high-balance mortgages. FHA and VA loans have higher loan limits in high-cost areas. Any mortgage loan that surpasses the maximum loan limits in traditional areas on FHA and VA loans are called high-balance FHA and/or VA loans. Maximum FHA Jumbo Loans in high-cost areas are capped at $822,375.  However, high-cost FHA loan limits depend on the county. HUD sets the maximum loan limits on high-cost areas. VA loans do not have a maximum loan limit on VA loans. However, loans over the conforming loan limits are called high-balance VA loans. Pricing is higher and it is a little more difficult to get an approve/eligible per automated underwriting system. To see what the conforming loan limits are on conventional loans, please check this FHFA map.

Borrowers Who Need A Jumbo Mortgage Loan

Borrowers Who Need A Jumbo Mortgage Loan

Housing prices are rising faster than the conforming loan limit increases. Both HUD and the FHFA have been increasing FHA and conforming loan limits for five years in a row and are likely to increase it again for 2022. Many homebuyers are getting priced out of the housing market because the loan amount they need is higher than the maximum conforming loan limit. This is when they need to get jumbo loans. Jumbo mortgages are not necessarily for homebuyers who are buying large exotic custom homes. Home prices vary depending on the city and state. Some average homes in San Francisco or other cities with expensive housing markets can exceed $1 million dollars. You are not talking about a mansion. Average 2,000 square feet homes can far exceed the conforming loan limit in expensive cities. Therefore, homebuyers need to qualify for a jumbo loan. Capital Lending Network, Inc. offers a wide variety of jumbo loan programs for homebuyers of expensive homes.

General Lending Requirements On Jumbo Loans

Every lender has its lending requirements and guidelines on jumbo loans. However, lenders, in general, have higher credit score requirements and larger down payment requirements. Jumbo mortgages are for primary owner-occupant homes, second homes, and investment properties. Typical down payments on jumbo mortgages are 20% to 30%. Most traditional lenders will require a 700 FICO or higher credit score and debt to income ratio not exceeding 41% DTI.  Gustan Cho Associates dba Capital Lending Network has specialty jumbo mortgage loan programs that we will discuss in this article.

Traditional 90% LTV Jumbo Mortgages

Traditional 90% LTV Jumbo Mortgages

Gustan Cho Associates dba Capital Lending Network, Inc. offers a traditional jumbo loan program that only requires a 10% down payment. The maximum debt to income ratio required is capped at 50% DTI. The minimum credit score on the 90% LTV jumbo loan program is 660 FICO.  The maximum loan limit is up to $2.0 million. Homeowners can get a 90% LTV mortgage on a cash-out to refinance. The maximum cash-out amount is $500,000. The 10% down payment jumbo loan program is available to first-time homebuyers.

The 90% LTV jumbo loan program is available for the following property types:

  • Single-family homes
  • Condominiums
  • Townhomes
  • 1-4 Unit owner-occupied or multi-family investment properties
  • Non-warrantable condos are eligible (though some restrictions apply)

Our traditional 10% down payment jumbo mortgage loan program is one of the most popular loan programs for homebuyers.

Non-QM Jumbo Mortgages 

Non-QM jumbo mortgages are non-traditional loan programs primarily for self-employed borrowers. CLN Mortgage now offers no-doc mortgages, bank statement loans for self-employed borrowers, asset-depletion loans, P and L stated income loans, and non-QM jumbo mortgages with credit scores down to 500 FICO. Non-QM mortgages do not require any waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale. Mortgage rates on non-QM loans depend on the borrower’s credit scores and down payment. Capital Lending Network, Inc. offers non-QM mortgages one day out of bankruptcy and foreclosure with no maximum loan limit. Many folks recover sooner than others after bankruptcy and/or a housing event. The down payment required is 30% if the bankruptcy and/or foreclosure has not been seasoned for one year. The longer the bankruptcy and foreclosure ages, the lower the down payment requirement. The lower the risk of the lender, the lower the mortgage rates. To qualify for the various jumbo loan program at Gustan Cho Associates dba Capital Lending Network, Inc. please contact us at 262-716-8151 or email us at gcho@gustancho.com. Text us for a faster response. The team at Capital Lending Network, Inc. is available 7 days a week, evenings, weekends, holidays.

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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.

Why Do Lenders Consider Jumbo Loans As Risky Loans

  • 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.

What are 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

What are 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.

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