Increased availability of jumbo mortgages is helping many home buyers in higher-cost areas, like southern California, Seattle, New York city, and dozens of other cities across the U.S.

Jumbo mortgage rates

First let’s look at current jumbo rates and trends. In a word, they’re great. A few years ago, a jumbo loan borrower would have to pay an interest rate a couple percentage points higher than they would if getting a conforming loan. Lenders considered jumbo mortgages a greater risk.

But now, jumbo loan borrowers tend to have great credit, and are buying a home they intend to live in, decreasing chances of foreclosure.

In addition, banks are attracting jumbo loan borrowers with low rates, in hopes these borrowers will park their assets in the bank’s investment options like IRAs and stock trading accounts.

While participation in a bank’s other financial services is not required for low rates, home buyers who want a loan above the conforming loan limit can still benefit from the low rates these banks offer.

To check jumbo loan rates now, complete a short online form here or call (866) 240-5121 for a free quote.

Jumbo loan limits

Jumbo loans have lower and upper end limits. There’s no official upper end limit to jumbo loans. That’s determined by the specific bank or lender. Some lenders will only offer loans to $1 million, while other go up to $5 million or higher.

There are standard lower end limits however. That limit depends on the loan type that you’re wanting and the geographical area where the home is located. Below is a list of typical low-end limits. If you’re looking for a loan below these amounts, you are better applying for a standard non-jumbo loan.

Conventional conforming loan limit: $417,000 and up to $625,500 for high cost areas (although areas of Hawaii have a limit of up to $721,050). Loan amounts between $417,000 and $625,500 are generally referred to as conforming high balance or conforming jumbo loans. These are not true jumbo loans, but a temporary extended loan limit allowed by Fannie Mae and Freddie Mac.

FHA: Base limit of $271,050 and up to $625,500.

VA: Base limit of $417,000 and going up over $1 million in a few areas. (Note: the VA loan is unique in that you can borrower more than the limit if you make a 25% down payment on the amount that exceeds the limit. For more information click here.)

So it’s safe to say that if you’re looking for a loan amount above $625,000, your best bet is to find and apply with a jumbo loan lender. Apply here.

Where to look for a jumbo loan

If you’re looking for a jumbo loan, it’s incredibly important to shop around at various banks, mortgage companies, and credit unions.

Why? Jumbo loans are not like conforming loans or FHA, where each lender approves the loan based on standardized nationwide criteria. With jumbo loans, each lender makes up their own rules for their own jumbo loan offerings.

You could check with one bank for your $2 million loan with 20% down, and find out they only lend to $1 million and require 30% down. But the bank across the street could allow up to $3 million with 20% down. Various banks will differ greatly on other guidelines like credit score and property type.

Also, some lender will offer fixed rate jumbo loans, while others only offer adjustable rates.

We have been able to help purchase and refinance borrowers with requested loan amounts up to $3 million. To find a lender for your jumbo loan scenario contact us here.

Jumbo loan guidelines

As a general rule, underwriting requirements for jumbo loans are stricter than those of conventional conforming loans or FHA.

Credit scores. You should have a score of at least 720 for the best chance of being approved for a jumbo loan. To get the best rates, you should have a score of 740+.

Reserves. This is the amount of money you have in bank accounts and investments. Banks want to see that you have reserves in case your income stops. It’s counted in months of housing expenses. So if your proposed house payment including principle, interest, taxes and insurance is $4,000, and your bank requires 12 months of reserves, you’ll have to have $48,000 in the bank, after the down payment and closing costs are paid for.

Down Payment/Equity. Many lenders allow a 20% down payment or current equity on a jumbo loan, but some require as much as 35% or 40%. Again, shop around until you find a lender who will accept the amount of money you can put down, or the amount of equity in your home if you’re looking to refinance.

Debt-to-Income Ratio. This is the comparison of your income to your total monthly payment including future mortgage payment. Lenders generally require you to have a debt-to-income ratio below 43.

Income Verification. Many jumbo loan borrowers have their own businesses and are self-employed. Gather your tax returns for the last two years. You’ll need them to prove your income.

Fixed jumbo mortgages

It’s just recently that fixed-rate jumbo mortgages have come back on the market. During the first few years after the mortgage meltdown, only adjustable rates of jumbo loans were available.

Now, 30-year fixed jumbo loans as well as 15-year fixed are available at great rates. These loans provide the security of knowing that the rate on your $1 million+ mortgage won’t shoot up to an unaffordable level.

Adjustable Rate (ARM) jumbo loans

If you don’t plan to have the mortgage for long, an adjustable-rate jumbo loan could work well. Interest rates are usually lower than jumbo fixed-rate loans. Though the rate starts adjusting after a certain amount of time, typically you can have an initial fixed period of 5, 7, or 10 years.

An adjustable-rate jumbo loan could be great for homeowners who plan to pay off the loan or sell the home within a few years.

The post Jumbo Loans: Easier Mortgage Qualifying, Lower Rates than in Recent Years first appeared on My Mortgage Insider.

What is a jumbo loan?

Let’s start with what makes a jumbo loan jumbo. In order to fall into that category, a home loan must exceed the Fannie Mae and Freddie Mac conforming loan limits, which generally max out at $766,550. In some other higher-priced real estate areas, that maximum can climb to $1,149,825.

The government typically backs loans below the conforming loan limits through agencies like Fannie Mae, Freddie Mac, FHA, and the Veterans Administration. Jumbo loans are not guaranteed or backed in any way, since they go beyond conforming dollar limits. Rather, private banks create, examine, and approve jumbo loans.

Private lenders determine jumbo mortgage guidelines

Lender terms will vary widely since they are the ones who are most on the hook for the borrowed amount. In other words, banks are picky when it comes to the kind of borrowers who will qualify, and those qualifications become stricter as the amount of the loan increases.

That being said, if you have an excellent credit score and a steady, high income with not much debt, some lenders may offer you favorable interest rates that are comparable to conventional loans.

“Jumbos don’t have a loan limit but at a certain point do require additional approval beyond standard guidelines,” says Michael Kinane, who leads Mortgage and Consumer Lending Products at TD Bank. Over the last 12 months ending July 2014, the TD average jumbo origination loan amount was about $700,000, he says.

Of course, banks and lenders do lend out more as long as certain stipulations are met. “As loan amounts increase, higher FICOs and lower LTVs [loan-to-value ratio] are required,” says Kinane. Interest rates will also creep up slightly depending on the amount of down payment and the borrower’s credit score.

What is the jumbo loan limit?

Some quick research reveals that bank-imposed jumbo loan limits are typically in the $2-3 million range. Some examples include EverBank and HSBC. However, unlike loans sold to GSEs (government-sponsored enterprises – Fannie Mae and Freddie Mac), there is no true jumbo loan limit, says Kinane.

That’s why it’s important to do your research on jumbo loan lenders nowadays. “The maximum financing allowed will be up to each lender to decide in accordance with their own risk tolerances,” says Kinane. “Most lenders will internally set a limit by which loan approval would require either executive and/or committee approval, in addition to standard underwriting procedures.”

Jumbo mortgage credit score & down payment requirements

As Kinane points out, with most jumbo lenders, as the loan amount requested increases, the guidelines will get more and more restrictive in terms of requiring higher FICOs and higher down payments.  So for lower jumbo loan amounts, the requirements could appear similar to loans sold to GSEs, but as you get higher – say, $1 million — you could see minimum down payment requirements rise from 10 – 20 percent up to 30 percent, and minimum FICOs go from 660-680 to 700-720.

“It would not be unheard of for multimillion dollar loans to have a minimum LTV of 50 percent and a minimum FICO of 740,” says Kinane.

Apply for a jumbo loan

If you have stellar credit and a good chunk of change to use as a down payment on your dream home, there is a jumbo mortgage programs out there for you. By comparing lenders’ programs, you can find the ones that offer the best rates for the amount of funding you need.

The post Jumbo Loan Limit : How High Can You Go? first appeared on My Mortgage Insider.

What could be better than sitting on your deck with a glass of wine watching the Gulf of Mexico at your backdoor? Sharon Waldecki gets to do that whenever she heads to her vacation home in Marco Island, Fla.

“My husband and I work very stressful jobs. We hop on a plane and in three hours we are sitting on the beach. It’s totally peaceful and so different from where we live,” she says.
The Waldecki family is among the lucky ones who can afford that second home to escape to for some rest and relaxation. If you’ve been considering finding that perfect vacation home, it could be a good time to fulfil that dream for a variety of reasons including financial, emotional and investment-wise.

“Yes, lending guidelines have tightened up in recent years. But we are actually seeing those guidelines loosen up a bit in the second home arena,” says Waldecki.
She serves as a senior loan officer and a Michigan and Florida lending specialist for VanDyk Mortgage. Helping others get loans for their second and vacation homes is one of her fortés.

Vacation home lending requirements loosening

That loosening up for instance might be seen in the down payment area.

“In the past, you would have had to put down 20 percent on a vacation home before a lender would look at you because the PMI (private mortgage insurance) companies refused to insure the loans without that much down. If you couldn’t get insurance on the loans, you couldn’t get the loans,” she says.

But today, many lenders will allow you to put just 10 percent down, and that’s only been in the most recent months, Waldecki says. However, the average vacation home buyer that she deals with usually puts down 20-30 percent of the purchase price.

Jumbo second home loans

Lately, she has been dealing with a lot of jumbo loans, where the minimum is $417,000 being borrowed.

“The jumbo market has gotten very competitive in the last six months. You can get a rate below a conventional loan with a jumbo loan,” she says.
Plus, she is also seeing some combination of first and home equity loans being worked out so people can buy that second home. However, many times she is helping people purchase that dream home that is $1 million or more.

“Most of the buyers that are buying over $1 million usually pay cash. If they want a loan, it is usually temporary because they are maneuvering their assets,” she says.
When people do buy vacation homes, they can usually hire someone from the area to check in on the property once a month and double-check things, she says. Many of the properties she helps buyers find in Florida are usually in associations, which can help with security while buyers are away.

Another positive for buying a second home is the tax deductions that come with it. “It all depends on your tax bracket. You need to talk with your CPA about this issue,” Waldecki says.

Inventory for vacation homes is quite high in many areas right now.

Mary Zeppenfeld, realtor for The Andrea Cross Group of Coldwell Banker in Holland, Mich., is selling and listing vacation homes in all different price points.
“We are getting more on the market all the time. The people we work with want luxury and a water view. They want it all,” she says.

Her agency has second homes available that cost $200,000 up to $40 million. The average is $2 million. Most of them sit on Lake Michigan or other surrounding lakes.
“Many of these homes come with the furniture. The furnishings are negotiated into the price,” she says. “The buyers don’t want to make any remodeling or repairs.”

Vacation homes to relive and create memories

Whether or not buyers of vacation homes are doing it for the investment, many are doing it for emotional or sentimental reasons, Zeppenfeld says.

“It might be that they have always wanted a home on Lake Michigan, or their grandparents had one while they were young. They have these great memories of their summers there with family all around them,” she says.

Vacation home buyers consider distance and amenities

When people consider buying that great vacation home, many do consider the travel time to and from the location. For instance, Zeppenfeld says many people from the Chicago area seek out their Lake Michigan paradise home about two to three hours from their home.

“It is the ultimate status for Chicagoans to have a Lake Michigan home. So, the closer to Chicago on the lake that you go, the more expensive the properties will be. Once you go up farther on the coast of Michigan, you can get more for your money,” she says.

But beware when buying a second home in certain states or counties when it comes to property taxes. For instance in Michigan, you could pay more than 40 percent more on your property tax bill if your home is not your primary residence, Zeppenfeld says.

Some vacation home buyers she works with are looking for active communities with festivals, great farmer’s markets and restaurants, bike paths and other outdoor amenities. Others just want peacefulness and no close neighbors.

“You just need to ask a lot of questions of your real estate agent and lender. But find a knowledgeable agent who knows the area. That person can check on everything from bi-laws and governance of a gated community to whether or not the building has been built on stable land, and whether or not a certain area works with your lifestyle,” she says.

The post Vacation Homes & Second Homes Now Easier To Buy first appeared on My Mortgage Insider.

According to property data firm CoreLogic, lenders issued more than 15,000 home loans in the $1 – $10 million range in the top 100 metropolitan areas during the second quarter of 2014 alone. This level marks an all-time high.

With jumbo mortgage rates lower than ever and credit flowing a bit more freely than in years past, high-net-worth home buyers are finding it is a good time to explore jumbo loan options. Here’s an overview of what a jumbo mortgage program is all about.

What makes a loan “jumbo”?

The first thing you need to know is what defines a jumbo loan. Essentially, it’s a home loan that exceeds the Fannie Mae and Freddie Mac conforming loan limits. In other words, the government does not back loans that go over the set amount – $417,000 for a single-family home, and up to $625,500 in more pricey areas like San Francisco. So those seeking higher amounts would have to go the jumbo loan route, or use a combination of lending products.

As you can imagine, immediately after the housing market struggles of 2008 and beyond, qualifying for a jumbo loan was difficult to say the least since lenders tightened up their purse strings. As the market levels out, jumbo mortgages are popular once again, since they are more accessible and more affordable than ever before.

Jumbo Mortgage Rates

Jumbo mortgage rates are typically higher than conforming loan rates as they represent a higher borrower risk. Check current mortgage interest rates here.

Usually, a 20 percent or higher down payment is required for a jumbo loan, so another perk is that there is no private mortgage insurance to pay each month. Also, the fees that are tacked onto Fannie- and Freddie-backed mortgage programs, called Loan Level Price Adjustments or LLPAs, don’t exist for jumbo loans. The jumbo mortgage borrower gets a pass on those. Finally, interest on jumbo loans up to $1 million is tax-deductible.

Jumbo loan guidelines vary widely

It’s important to note, however, that each lender has their own requirements and terms, which are constantly changing, so be sure to note such differences when shopping around. Especially in the case of jumbo mortgages in which there is no government or national standard that must be followed, the lender has more flexibility when it comes to deciding who qualifies for their programs.

Choosing to go with a jumbo mortgage could simplify your home purchase as compared to combining a first and second mortgage. The second mortgage interest rate could adjust higher in the future. And you have to deal with two loan applications, two lenders, and two loan document signing sessions.

With jumbo loans, there is only one lender, and you can choose a fixed or adjustable rate, depending on your preference. As for loan limits, again, that depends on the lender. Some banks will go up to $5 million or more, while others will cap their loans at $1 million.

Banks entice wealthy clients with low Jumbo Mortgage Rates

From the lender standpoint, because a large down payment, very strong credit, a high income, and the preference for a strong cash reserves is usually required to qualify for a jumbo loan, they know that these borrowers are typically less risky than the average home buyer. In short, lenders want to entice these wealthy borrowers by offering competitive jumbo loan mortgage rates and terms, and then hopefully introduce them to their other financial products as well. As such, if you’re aiming to qualify for a jumbo mortgage, be prepared to have very strong credentials and undergo a thorough underwriting process.

A Great Time to Apply for a Jumbo Mortgage

As the luxury home market heats up, jumbo mortgages are keeping pace. Purchasing a higher priced home is now just a jumbo loan away for many buyers. And for good reason. Homebuyers who meet the qualification standards get a large loan, low rate, and a lender who really wants their business.

The post Loosening Rules, Low Jumbo Mortgage Rates Fuel Hot Housing Segment first appeared on My Mortgage Insider.