Over just the past few years, the number of different loan programs has fallen into primarily two categories. Conventional loans and government-backed mortgages. Conventional loans are those typically underwritten to guidelines established by Fannie Mae and Freddie Mac while government-backed mortgages include VA, FHA and USDA loan programs.
Conventional loans can also be approved using guidelines established by so-called “jumbo” lenders and while similar to guidelines established by Fannie Mae and Freddie Mac, they will have their differences.
Fannie and Freddie both increased the maximum allowable conforming loan limit in 2023 to $726,200. Some high-cost locations in California (Los Angeles, San Francisco, etc) and South Florida, and the North East are higher – up to $1,089,300. Any mortgage loan above the threshold is considered a jumbo loan. Jumbo loans can carry slightly higher interest rates and can require a higher minimum credit score compared to conforming and government-backed loan programs. For example, a conforming loan might require a minimum credit score of say 620 for most lenders yet with a jumbo loan the minimum score is 680.
Jumbo lenders can assign their own underwriting guidelines but most follow the same basic set of requirements. As they relate first-time homebuyers, are there any special provisions for this class of borrower?
Mortgage lenders consider someone who has not owned a home within the previous three years a first-time buyer. If someone owned a home for 10 years yet sold it and rented for the past three, lenders still consider this individual a “first timer.” So what’s the big deal about a first time home buyer?
Various government agencies, typically state and local, can often provide incentives to first-time homebuyers in order to buy and finance their first home. For most first-time homebuyers, the single biggest obstacle to homeownership is coming up with the funds needed for a down payment and closing costs. A common first-time home buyer benefit is a temporary loan or a government grant to the borrowers in order to cover the down payment and closing costs on a purchase. Most of these programs have certain income limits or other requirements such as buying in a particular part of the city. But are there first-time programs for jumbo loans?
First Time Homebuyer Jumbo Loans:
In short, no. But it is a question that is not uncommon in today’s marketplace when first-time buyers start shopping for a home in the luxury market where home prices could easily exceed $1 million, especially in California, Florida, New York, etc. The guidelines for a typical jumbo home loan are relatively common and most lenders adhere to them. Borrowers must demonstrate at least a two-year employment history and provide copies of their two most recent W2 forms as validation.
They will also be expected to provide the most recent paycheck stubs covering a 60 day period. For those that are self-employed, jumbo lenders ask for the two most recent year’s federal income tax returns as well as a prepared year-to-date profit and loss statement.
Jumbo loans will ask for a minimum credit score of at least 680 but that can also change based on the buyers down payment amount. Most jumbo loans ask for a down payment of at least 20% of the sales price yet there are special jumbo loans that will only ask for a down payment of 5%-10% depending on the loan amount. Learn more about all the down payment and credit score requirements on the Jumbo Purchase page.
If you’re a first-time buyer and are searching for a property in the luxury market, there really aren’t any programs reserved especially for you. Instead, you will be underwritten just as with any other borrower and under the same guidelines. However, with financing options available to 95% loan to value, this will certainly help make your goal of home ownership more obtainable.
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