Jumbo Mortgage Financing Newark, NJ: Homes in Essex County have median home values that are higher than in most parts of the country. For example, the median home value in Essex County is around $567,000 and a bit lower in Newark. The 2024 Conforming Loan Limits for most of the United States is $766,550 with certain high-cost locations up to $1,149,825.
These are conventional loans underwritten to guidelines established by Fannie Mae and Freddie Mac and almost every mortgage company anywhere approves loans using one or both of these standards.
Yet for those buyers who want to borrow more than the conforming maximum, the alternative is jumbo financing. Mortgages above the conforming limit of $766,550 fall into this category. Mortgage lenders offer both conforming conventional as well as jumbo loans. Jumbo loans offer both fixed rate as well as hybrid ARM options and most ask for a minimum 10 percent down payment in order to get the most competitive rate. Yet some borrowers opt to put less down and keep as much cash in their bank accounts as possible, in these cases 95% jumbo financing may be the best option.
Interest rates have risen over the last year and borrowers may wish to leverage as much as they can. Real estate isn’t as liquid when compared to other asset classes and when property owners seek to tap into the equity in their homes they must apply for a home equity line of credit or pull out cash during a refinance. For those seeking maximum liquidity, putting as low a down payment as possible is the preference.
Jumbo lenders will typically approve a jumbo application in Newark in a similar fashion as approving loans for conforming programs. Borrowers will need to provide evidence of sufficient income, show good credit (generally above 680), and verify there are enough funds for a down payment, closing costs, and reserves. Reserves are calculated as the number of mortgage payments remaining in a liquid account.
If a jumbo mortgage program asks for three months of reserves to be available to the borrowers after closing and the total mortgage payment including principal and interest, taxes, and insurance adds up to $5,000, six months of reserves is six times $5,000 = $30,000. These aren’t for closing costs but have to be available after the down payment and closing costs are settled.
Jumbo loans can require a higher credit score compared to some other programs. For example, there is a jumbo loan program that only asks for a 5% down payment and utilizes the first mortgage at 80% of the value of the property and a second lien at 15%. Lenders refer to this structure as an 80-15-5, with the 5 being the amount of the down payment. In select states, a single 95 percent loan option is also available with no private mortgage insurance.
The minimum credit score for this 5% down program is 700 and they require 6 months of payment reserves. Individual jumbo lenders will have their own internal lending guidelines so qualifying requirements can change slightly from one lender to the next but all follow some basic program guidelines.
Many borrowers who buy and finance luxury homes and take out a jumbo loan are self-employed and they are approved a bit differently compared to someone who is employed and receives a regular paycheck on the 1st and 15th of the month. Self-employed borrowers are required to provide the most recent two years of income tax returns and provide a year-to-date profit and loss statement.
Income over this period should be consistent with no major swings from one year to the next. Business bank statements are also reviewed to confirm cash flow and income from the enterprise. Note, that business owners also have a new bank statement deposit option that qualifies buyers based on their actual deposits, not tax returns.
Buyers can read about all the 90% and 95% jumbo options on the Jumbo Purchase page here. Contact us with any questions by submitting the Quick Contact form on this page. Please also call us at Ph: 800-962-0677
Serving buyers nationwide, including New Jersey: Newark, Jersey City, Paterson, Elizabeth, Toms River, Trenton, Clifton, Camden, Passaic, Union City, East Orange, Bayonne, Vineland, New Brunswick, Lakewood, Perth Amboy