Navigating Knoxville’s Jumbo Loan Approval Process

The allure of the East Tennessee real estate market is undeniable for prospective homebuyers or current residents looking to upgrade in Knoxville. Tucked between the Great Smoky Mountains and the vibrant downtown, Knoxville is a city abuzz with potential and a becoming a major hot spot for real estate.

Current Status of the Real Estate Market in Knoxville:

Like most of Tennessee, Knoxville’s real estate market has remained healthy, with a nice surge in activity in recent years. The median home price  has steadily increased over the past few years and currently sits around $435,000. This growth can be attributed to several factors, including, a strong job market, and an influx of new residents relocating to TN.

For those looking to buy a new home or invest in property, Knoxville offers many advantages. The city boasts a diverse range of neighborhoods, from historic homes in the Old City to modern developments in West Knoxville. Additionally, the cost of living is relatively affordable compared to other major cities, making it an attractive option.

Understanding Knoxville Jumbo Loans:

What exactly are jumbo loans, and why are they crucial in today’s real estate market?  Jumbo loans are designed to finance properties exceeding the basic conforming loan limit that is set by Fannie Mae and Freddie Mac. For Knox and surrounding counties, the conforming loan limit is currently limited to $766,550 for a standard 1-unit property. So any loan amount exceeding this would be classified as a Jumbo loan.

*See the chart below for loan limits on muti-unit properties under “standard”

Since the median home price is in the $400’s –  a regular conventional loan will suit most buyers. But what about buyers purchasing in more luxury neighborhoods like Sequoyah Hills, Bridgemore, Lyons View or Downtown? Many of these luxury properties can easily exceed $1m purchase prices, and that is where Jumbo financing comes into play.

Knoxville Jumbo Eligibility Criteria:

Jumbo mortgages often require a substantial down payment from most banks or lenders, typically in the 10-20% range. However, new innovative financing solutions extend up to 95% financing with combo piggyback mortgage options for qualified home buyers. This is especially helpful for first-time homebuyers looking to minimize their down payment.

To be eligible for a jumbo loan, the borrower should have a good credit score, decent debt-to-income ratios, and generally 5-10% down payment. The down payment amount is closely tied to the loan amount desired. In general, 95% is possible for loan amounts up to $1.5m and 90% up to $3m.  Please be sure to check the Jumbo Purchase page for all the latest requirements. Please note, these requirements apply only to owner occupied primary homes.

Additional options are available to borrowers purchasing vacation homes or investment property. These options often require a larger down payment and reserve requirements.  Please see the main home page for requirements.

Exploring 95% Jumbo Piggyback Mortgage Options:

Combo piggyback options have become a popular option for borrowers putting down less than a 20% down payment.  This combo loan structure entails taking out a primary 1st mortgage together with a smaller 2nd mortgage. This structure can offer a few advantages, including:

• Avoid paying Private Mortgage Insurance (PMI) something that is normally required for loans exceeding 80% loan to value
• Granting borrowers access to more favorable interest rates. Many times borrowers are able to keep their 1st primary loan at the conforming loan limit, and take a smaller subordinate 2nd loan to make up the difference. These are often referred to as 80/10/10 or 80/15/5 combo loans. By doing so, they often receive more favorable interest rates on the larger primary loan and avoid PMI.

Additional Special Programs:

• Eligible Veterans will want to learn about special VA Jumbo options that permit 100% financing up to $2m-4m loan amounts.
• Self-employed business owners can learn about special bank statements qualifying programs here.
• Building a new home on your own lot? Learn about construction to permanent financing on the Jumbo purchase page above.

It’s important to understand your available financing options, and partnering with a reputable lender. Homebuyers that want to learn more are encouraged to reach out to 7 days a week by calling the number above, or just submit the Quick Contact Form on this page.