When it comes to Jumbo loans, lender and banks approve a mortgage request using requirements in addition to standard underwriting criteria. A guideline is often considered a “judgment call” based upon past experience or a loan approval rule that has a bit of flexibility with it. For example, requirements for jumbo loans are things such as a minimum required down payment. If a jumbo loan used to finance a $1,300,000 property in Minneapolis Minnesota requires a 5% down payment there’s no flexibility. Another requirement might be related to owner occupancy. If a mortgage company requires a 10% down payment they can also require the borrower to occupy the property as a primary residence. If the borrower is buying a rental then the down payment requirement can change drastically.
Jumbo loans normally always require verification of at least two years of employment whether regular or self-employment. If there are any “gaps” in employment the gaps must be reasonably explained. There are certain exceptions for recent graduates on their first job or discharge from military service with verified employment but overall the two-year employment requirement is typically required.
Some soft guidelines can permit a bit of leeway depending on the other positive factors of the loan like credit score, etc. For example, say that guideline for a 95% jumbo loan states the debt ratio limit of a mortgage payment to be approximately 33. The principal and interest payment, taxes and insurance added together should not exceed 33 percent of buyers total gross monthly income. The lender often has some leeway here if dealing with a strong buyer that has greater down payment, higher credit score, etc. The lender could also document cash reserves in the bank that far exceed the cash reserve minimum. Other factors such as length of employment or the likelihood of a promotion or an increase in income can also be considered. Thre bottom line is certain exceptions can be made as long as the lender can determine the borrower’s ability to make the payment monthly payments on time and will continue to do so well into the future.
It’s important to know that positive compensating factors can’t overcome a “hard” requirement such as a minimum down payment requirement (5%, 10% or 20% down) for certain loan programs. Hard requirements can’t be overcome but an experienced lender who can spot certain characteristics that can support an exception to a guideline can provide the knowledge needed to help facilitate loan approval.
Buyers can browse the blog and Jumbo purchase page to learn more about all the 90% and 95% Jumbo financing loan requirements. Questions? Please call us or just submit the Quick Contact form for expedited service 7 days a week.
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