Jumbo Loans
A jumbo mortgage is a loan that exceeds $417,000. The high amount of the loan forces many lenders to decrease risk by enforcing strict qualifying requirements. Borrowers with stronger credit and lower debt-to-income ratios can assure a lender's investment will not be a loss. The application process for a jumbo mortgage is very detailed and requires proper documentation.
Debt-to-Income RatioCreditors will look at the current debt-to-income ratio when reviewing an application. This represents the amount of debt as a percentage of total income an applicant can have to qualify for a jumbo loan.
Debt-to-income ratio should not be over 45 percent. As example, if a person earns a total of $10,000 per month, monthly debt payments, including mortgage cannot exceed $4,500 per month.
Loan-to-Value RatioThe lender will also take into consideration the loan-to-value ratio. This is the percentage of loan taken out compared to the actual value of the property. The loan-to-value should not exceed 90 percent. As an example on a house valued at $525,000, the loan-to-value at 90 percent means a loan cannot exceed $472,500.
Required IncomeThe required income depends upon the amount of the loan. Proof of income is required whether employed or self-employed. The debt-to-income ratio becomes important at this point. As previously stated the debt-to-income ratio should not be over 45 percent.
For a house that is valued at $525,000 with 20 percent down, the loan value is $420,000 with monthly payments of roughly $4,200 per month. With no other debt, the monthly income must be $9333. If there are other monthly debt payments like car payments and credit cards, monthly income must be higher.
Loan MinimumRemembering the 90 percent loan-to-value ratio, in order to qualify for a jumbo loan of $417,000--the value of the property must be at least $463,333. If the loan falls below $417,000, it is not considered a jumbo loan and qualifies under standard loan calculations.
Interest RatesAccording to Bank Rate, as of July 2010, the average interest rates for jumbo loans vary from 5.5 percent to 6.5 percent. Rates are calculated as a matter of credit score, loan-to-value ratio of the property, overall property worth, credit worthiness and income to debt ratios.
Down PaymentMany jumbo mortgage lenders require a minimum of 20 percent down payment. Some will be willing to accept a 10 percent down payment but only at the expense of a higher interest rate. In a refinance, equity over and above the loan-to-value ratio must be within these guidelines as well.
For instance if purchasing house valued at $850,000 in July 2010's real estate market, the buyer must come up with a down payment of $170,000 at 20 percent. If he is refinancing an existing loan, he must have equity of $85,000 or more in the home at a loan-to-value ratio of 90 percent.
Debt-to-Income Ratio
Debt-to-income ratio should not be over 45 percent. As example, if a person earns a total of $10,000 per month, monthly debt payments, including mortgage cannot exceed $4,500 per month.
Loan-to-Value Ratio
Required Income
For a house that is valued at $525,000 with 20 percent down, the loan value is $420,000 with monthly payments of roughly $4,200 per month. With no other debt, the monthly income must be $9333. If there are other monthly debt payments like car payments and credit cards, monthly income must be higher.
Loan Minimum
Interest Rates
Down Payment
For instance if purchasing house valued at $850,000 in July 2010's real estate market, the buyer must come up with a down payment of $170,000 at 20 percent. If he is refinancing an existing loan, he must have equity of $85,000 or more in the home at a loan-to-value ratio of 90 percent.
CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A MORTGAGE BANKER OR A LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE, SIGN AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE DOWNLOADED AND PRINTED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.
THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEB SITE AT WWW.SML.TEXAS.GOV.
Interest rates, program terms, and conditions are subject to change without notice. Not all products are available in all states or for all loan amounts. Loans are subject to credit review and approval. Properties securing all loans must be located in the U.S. Other restrictions and limitations may apply.
