If you're in the market for a new home, chances are you've done your research. Buying the home of your dreams is so much more than finding the right one, especially if you're planning on buying a high-value property. Before you can put in an offer, you have to consider financing. In fact, most sellers will require proof of pre-qualification before they consider an offer.
While most mortgages are sold to Fannie Mae and Freddie Mac, these are subject to limits set by the Federal Housing Finance Agency (FHFA). Jumbo mortgages are designed for borrowers looking to secure financing above conforming lending limits. Because these loans carry a higher risk to the lender, the application process will look a little different.
As house prices continue to rise, more and more buyers are turning to jumbo loans. In most markets, if the loan amount for your home is over $726,200, you cannot qualify for a conforming loan. (If the property is a 2-4 Unit and/or is in a High Cost Area, limit is higher than that of a one unit property in a non-High Cost area). Jumbo mortgages are usually the easiest and most straightforward option in this situation. If you're uncertain what mortgage type is right for you, an experienced Home Lending Advisor can explain your options.
With any mortgage, you must meet basic lending requirements. These requirements are in place to help the lender determine whether you have the means to meet the loan terms. All loans carry a certain level of risk for the lender. Because jumbo loans are not sold to Fannie Mae or Freddie Mac, they carry a much greater risk. To offset this, jumbo mortgages typically have stricter qualification requirements.
To qualify for a jumbo loan, some of the main factors your lender will look at include:
The more you can do to prove you have the means to pay back your loan, the greater your chance of qualifying for a jumbo mortgage. Every lender has different requirements, so shop around until you find the one that best suits your needs.
Applying for a jumbo mortgage loan isn’t that different from applying for a regular mortgage. There are five main steps to the jumbo mortgage application process:
Because the scale of a jumbo loan is larger, there may be stricter requirements for each phase of the process. Here’s a detailed breakdown of what to expect at each step.
Nobody likes paperwork. However, one of the most common reasons loans are delayed is because applicants don’t have their paperwork ready. The best thing you can do to expedite the application process is gather as much financial data as you can before you apply for the loan. In most cases, this includes:
Don't wait until the last minute to gather your financial records. The last thing you want to do is lose the home of your dreams because you’re waiting for documents.
A home is a big purchase. If you don't already have a lender, now's the time to find one. In a competitive market, homeowners may receive multiple offers. Your offer may be more attractive if you can provide a pre-qualification letter.
There are a few things you should consider when you're looking for a mortgage lender:
You’ll be working with your lender a lot over the next few months. Choose someone you’ll be comfortable working with who has the experience to meet your needs.
Time for the fun part! It’s best to start shopping once you’re prequalified for a loan. You don’t want to fall in love with a home only to discover you can't get a mortgage.
If you've ever bought a house, you know you want to come in with a competitive offer. However, you have to be careful about offering too much, even if you can afford it. Most home loans are subject to an appraisal. If your offer is greater than what the property appraises for, the bank may require you to put more money down to approve your mortgage.
Lenders obtain an appraisal to determine the value of the home you want to buy.
When it comes to jumbo loans, many lenders require two appraisals if your loan exceeds a certain amount, or the original appraisal has expired.
Closing is the final step in the jumbo mortgage process. This is where the lender does a final review to make sure everything is in order before they fund the loan. One of the biggest mistakes buyers make is making a change to their finances just before closing. Don't do this. A large purchase or a sudden withdrawal can completely derail your application.
At this stage, it's normal to experience a longer wait time. Jumbo mortgages are high-risk loans and often require extra verification steps. If you have questions, don't be afraid to reach out to your lender.
Buying a home should be a fun and exciting process. There are a few things you can do to make the jumbo application experience easier:
Obtaining a jumbo loan doesn't have to be a complicated process. The more prepared you are, the smoother the transaction can go. If you have questions or are ready to start the jumbo mortgage financing process, contact a Home Lending Advisor.
