For those purchasing a higher priced home, their loan options are generally confined to the jumbo mortgage arena. But that doesn’t necessarily mean a jumbo loan is more limited, or difficult to qualify when compared to a conforming or FHA mortgages. In fact today there are many 10% and even 5% down Jumbo financing options available for qualified buyers. In most parts of the country, the maximum conforming loan limit is $424,100, with certain locations in California, Florida, DC, North East being higher. Any loan amount higher than that and it falls into the jumbo category. When you submit your loan application, here’s what you can expect.
If you haven’t received your preapproval letter from your lender, now would be a good time to start the process. A preapproval letter is evidence to a seller that not only are you serious about buying a home but you have already talked to a lender. All you need to move forward is to find the perfect home to purchase. A loan officer can give you an idea on how much you can borrow and provide you with estimated monthly payments but a preapproval takes it a step further.
Once you submit your application your lender will order a credit report along with credit scores. The minimum credit score for most jumbo loans is 680 when financing over 90% loan to value. Home buyers with higher down payments can often be approved with credit scores down to 660. There will be three separate credit scores and the lender will use the middle score, ignoring both the highest and the lowest score.
Jumbo lenders are required to verify an ability to repay the mortgage which also includes other monthly credit obligations such as an automobile loan or credit card. This is performed by comparing debt with gross monthly income, expressed as a ratio. This “debt ratio” should typically be no greater than 41 although jumbo lenders have the ability to make an exception up to 45 or even higher.
Income is verified by reviewing copies of your most recent pay stubs covering a two month period. You also need to have at least two years of employment verified, which is completed by providing your lender with your last two years’ W2 forms. If you’re self-employed your income is calculated using your two most recent years’ federal income tax returns. Your lender will add those two years of income together and divide by 24 (months). This is your net business income after expenses are subtracted from proceeds. Any depreciation or amortization deductions are added back.
Different jumbo loan programs will have different down payment requirements. To make sure there are enough funds for a down payment, closing costs and cash reserves lenders will review copies of your most recent bank and investment statements from the accounts used for the purchase.
Once your application and purchase contract has been received the lender they will order your property appraisal. You can expect to pay for the appraisal in advance. Further, a title report will be ordered along with other necessary third party services. When the loan is fully documented it is forwarded to the lender’s underwriter for an approval. The underwriter is the individual responsible for making sure the loan application and documentation conforms to the proper lending guidelines. Depending upon the loan volume at the lender and current market conditions you can expect your loan to be approved within 24-48 hours. If the underwriter has any questions about the loan, you can still get an approval based upon certain conditions being met.
When the loan is fully approved, the loan package is digitally transferred to your settlement agent where you will sign your closing papers. Once signed and initialed, the package is returned to the lender for a review. As the lender approves the signed documents, your loan is funded.
Questions? Read more about Jumbo purchase programs here. Please contact us by calling ph: 800-840-6449. Happy to serve home buyers across the nation – Richmond, San Jose, San Diego, Flagstaff, Portland, Seattle, Salt Lake City, Denver