Today, we will discuss the Jumbo loan process for Virginia home buyers. When mortgage companies evaluate a buyer’s loan application, they primarily review a few key factors. These include credit, income, and the ability to repay the debt and assets available to close a transaction.
With regard to credit, lenders rely mostly on credit scores obtained from the three major credit reporting agencies. Lenders are also required to demonstrate an “ability to repay” a debt and use a combination of verified income and minimum monthly credit obligations to arrive at the borrower’s debt-to-income ratios.
When figuring out the mortgage payment, lenders use the principal and interest payment on the mortgage as well as a monthly allotment for property taxes and home insurance premiums. This payment amount is added to other minimum monthly credit obligations such as credit card debt, installment loans, auto loans, etc. If there is any evidence of monthly spousal or child support payments lasting more than two years, those too are calculated to conclude the ability to repay monthly credit obligations.
The final key qualifying factor is equity, or the amount of down payment a borrower puts down at closing. Most jumbo loan options in VA require at least a 10 percent down payment. However, select lenders are now permitting up to 95% financing on loan amounts up to $1.5 -$2m. Example: on an $1,500,000 home purchase, that amounts to $75,000 for the down payment.
Closing costs are also an added expense for any jumbo loan and the mortgage company needs to verify there are enough available funds to pay for these costs as well. Finally, jumbo loans can require a minimum amount of funds known as reserves. Mortgage payment reserves are savings after the down payment and closing costs. The lender will generally want to see the applicants have at least (3-6) months of payment reserves after the down payment and closing costs are paid.
Out of all the mortgage programs available in Virginia, including those underwritten to Fannie Mae and Freddie Mac guidelines as well as government loans, jumbo loans account for about one out of every five mortgages placed. Yet unlike Fannie Mae or FHA requirements, there are no universal jumbo guidelines that must be followed. Instead, jumbo lenders establish their own set of guidelines when evaluating a jumbo mortgage application.
Other lenders may also approve jumbo loan applications based upon a jumbo lender’s guidelines and then sell that loan to others. Doing so replenishes a lender’s line of credit to be used to approve new loans.
The current loan limit for basic Fannie Mae conventional mortgages in Virginia is $806,500 – $1,209,750 depending on the county. Please see the full county-by-county list for Conforming loans here. *Any loan amount that exceeds this would be considered a jumbo loan.
As mentioned above, Virginia buyers now have Jumbo options that require only a 5% down payment. This is great for higher-cost buyers in Virginia Beach, Arlington, Washington DC, Norfolk, Richmond, etc. Some buyers may have good monthly cash flow but little saved or have cash tied up in higher-yield investments.
After all, this can make even more sense when mortgage rates are at the low levels of recent months. The minimum guidelines for the 95 percent jumbo program are pretty much the same as other programs. Below we will outline the important requirements buyers will need to know before applying:
- The home must be a primary residence or vacation home
- The loan amount must not exceed $1.5m -$2.0m for 95% financing, depending on if high-cost area like DC. Qualified buyers with a 10% down payment can finance up to $3,000,000
- Buyers are required to have a 680 credit score to be approved for 95% financing.
- Assorted fixed rate and adjustable rate options are available
- Close in as little as two weeks
- Learn more about the Jumbo Purchase criteria here.
Serving buyers nationwide including Virginia Beach, Norfolk, Chesapeake, Arlington, Richmond, Newport News, Alexandria, Hampton, Roanoke, Portsmouth, Suffolk, Lynchburg, Centreville, Dale City, Reston, Harrisonburg, DC
Home buyers with questions can submit the Quick Contact form located on this page for a rapid response, or call us above.
