Jumbo financing options have continued to expand in 2022. As a result, financing LTV limits have increased from 95% to 96.5%. This new 3.5% down Jumbo loan has a few added qualifying requirements not required in the higher down payment programs. Below we will discuss the details and benefits, homebuyers that have questions should connect with us 7 days a week by calling the number above, or just submit the Quick Contact form on this page.
**UPDATE: Please note the 3.5% down program has been temporarily discontinued for 2023. Please check into the 5% down option.
This low down payment program can be beneficial for multiple scenarios:
- The borrower may be relocating and have to sell and buy a house at the same time. In this case, a larger 10% or 20% down payment may not be possible for buyers who have significant equity tied up in their current home that is listed for sale.
- Borrowers that feel their savings will earn a greater return in higher-yield investments.
- New professionals like Doctors or Lawyers that have sufficient income for qualifying but lack large savings.
As stated above, the maximum 96.5% financing does have additional requirements in order to be approved. Below we will outline the core program guidelines:
- The loan limit is set to $1,500,000
- Min 720 credit score for all borrowers listed on the loan application
- Primary residence only for max financing. New construction and vacation homes are permitted only with a greater down payment. Investment / Rental purchase is not permitted
- Single Family & Townhome only, Condos are NOT eligible
- 24 months of mortgage payment reserves are required.
So what exactly is payment reserves? This is the amount of liquid or non-liquid savings a borrower can show after the down payment and closing costs are satisfied. Example: Let’s say home buyer John decides to purchase a home for $1,000,000 with the min 3.5% down payment. His mortgage payment with taxes, homeowners insurance (PITI) would be approx $5,000 per month. In this case $5,000 x 24 = $120,000. So for this example, John would need to document $120,000 after the 3.5% down payment and closing costs are paid.
The good news is non-liquid retirement accounts like 401(K), CD’s and IRA’s do satisfy the reserve requirements. So the payment reserves are not required to be liquid savings, etc. This requirement is one of the key differences when compared to the higher 5-10% down programs. Most of these programs require little to no payment reserves due to the reduced risk to the lender.
Like many of the other low down payment Jumbo programs, the 96.5% financing option has many great benefits:
- No monthly mortgage insurance
- No pre-payment penalty
- Secure 30 or 15-year fix rate terms, or common adjustable-rate terms available
- Very competitive interest rates
- Closing in as little as three weeks
Want to learn more? Please connect with us today by submitting the short Quick Contact form on this page.