Where Can I Get A High
High-balance loans and jumbo loans are issued by traditional housing lenders, including banks, credit unions and other financial institutions. Fewer institutions offer them than issue traditional home mortgages, however, so you may need to check lender websites for their availability when identifying where to apply for the loans.
What Is A Jumbo Loan In Washington State In 2021
In this post, we will go over the basics of jumbo loans in Washington State in 2021. We will provide a short definition of jumbo loans, cover current rates in WA State, and then discuss how these current rates relate to current home prices.
A jumbo loan is a conventional mortgage loan that exceeds the conforming size limit for sale to Freddie Mac and Fannie Mae. These limits vary by county. For most counties in Washington State, the conforming loan limit is $548,250. So a jumbo loan is one that exceeds that amount. But certain counties, like those in the Seattle metro area, have higher jumbo loan limits.
This is the latest entry in our blog series that answers frequently asked questions from Washington State home buyers. Todays question is:
Do You Qualify For A Jumbo Loan
Like any type of mortgage, jumbo mortgage approvals happen on a case-by-case basis. While it’s safe to say that it’s more difficult to qualify for a jumbo mortgage than a traditional mortgage, having a few missed payments on your credit history or a lower savings account balance may not automatically prevent you from getting a jumbo mortgage.
Everyones financial situation is unique. Talk with a Home Lending Advisor to learn about what options you have. You can also check out our free mortgage calculator to get a better picture of jumbo mortgage payments. Or, if you’re ready to buy that dream house, you can apply for a jumbo loan today.
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What Are The Perks Of A Jumbo Loan
A jumbo loan may have big advantages for qualified recipients. It allows you access to funds that exceed conforming limits, which means purchasing a higher-priced, even luxury home is more attainable.
In addition, jumbo loans are available in different rate options, so you can have the flexibility to choose between a fixed-rate and adjustable-rate mortgage, depending on whats best for your lifestyle.Are you looking to purchase a second home? Some lenders may offer a jumbo loan on a second home, making this a good choice for those looking to buy a second, perhaps vacation, property.There are also tax benefits associated with jumbo loans that make them an attractive choice for many homebuyers.Each month, part of your payment consists of interest. All of the interest you pay is tax deductible if your loan is less than $1 million, or $500,000 if you are married and filing separately. However, keep in mind this a general rule of thumb and there are some restrictions. Always contact a tax professional for specifics.
Who Qualifies For A Jumbo Mortgage
In the United States, most mortgages are purchased by Freddie Mac and Fannie Mae. These government sponsored enterprises buy loans from lenders and, in turn, sell them to investors. This helps reduce the risk to lenders and allows them to offer affordable lending to people across the country.
Unlike most conforming sized loans, jumbo mortgages are not purchased by the GSEs. This means the lender takes on a bigger risk. To offset that risk, lenders typically require higher standards from borrowers. In order to qualify for a jumbo loan, you may need:
- Higher minimum credit score
- Lower loan-to-value ratio
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What Is A Va Jumbo Loan
Typically, a VA loan is considered a VA jumbo loan when the loan amount exceeds the county-specific VA loan limit. The VA loan limit for most counties in 2021 is $548,250 but reaches $822,375 in high-cost areas.
Looking for an exact VA jumbo quote?Speak with a trusted VA-lending specialist today
Its important to remember that VA loan limits don’t represent a cap on your purchasing power. There is no maximum VA loan amount set by the government.
Instead, the loan limits help determine how much veterans without their full VA loan entitlement can borrow before needing to put money down. Veterans with full entitlement can borrow as much as a lender is willing to lend without the need for a down payment.
What Are Jumbo Loan Reserve Requirements
A cash reserve is extra money the borrower has after closing. Some lenders require a cash reserve to see if the borrower has adequate funds to finance the home post-closing. The type of loan you finance will determine how much money the lender will require to see.For example, if you were to finance a conforming loan, some lenders may require to see at least three months worth of funds to cover mortgage payments. On the other hand, almost all jumbo loans require significant cash-reserves. In some cases, lenders may require borrowers to prove they have 12 months worth of funds to finance mortgage payments. Jumbo reserve requirements are much stricter than conforming loans because the lender takes on a larger risk when financing them. During your pre-approval process, your lender will evaluate your financial history and status to determine if you meet their qualifications. They will also tell you how many months of reserves you will need to qualify. The number of months varies from lender to lender and depends on how large the loan is.
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How To Calculate Dti
The first step to calculate DTI is to add up all your monthly bills. Your lender will verify this information through your credit report and any other debts where you provide information. If youre submitting a joint application, be sure to include outstanding debt for both of you. Next, figure out your gross monthly income. If you have more than one source of income you may be able to include it all. Things that may be considered income for the mortgage include:
- Wages
- Self-employment income
- Monthly health insurance premiums
Jumbo Home Loans After The Housing Crisis
- It was very difficult to obtain a jumbo loan after the mortgage crisis
- Because mortgage lenders became very conservative and only originated loans that could be easily resold
- At the same time the secondary market for such loans completely locked up
- But now its business as usual again and jumbo loans are readily available
For a period of time after the mortgage crisis took hold, jumbo mortgage rates were quite a bit higher than conforming rates, and it was much more difficult to obtain financing for jumbo loans than it had been.
This was mainly because the secondary market for jumbo mortgages, or really any mortgages not backed by the government or Fannie/Freddie, had simply dried up. As a result, financing those types of loans came at a premium.
Today, now that the housing market has largely recovered, jumbo loans are a lot easier to obtain and pricing is quite favorable. In fact, its possible to secure a comparable rate or even lower rate than a conforming loan.
Many investment banks offer very competitive jumbo rates to their private banking clientele that can rival conforming rates. Additionally, high net-worth individuals can take advantage of pricing specials if they have a large amount of assets with a certain depository.
In other words, dont assume a jumbo will cost more while the loan amount might be high, the mortgage rate can be quite low. And today jumbo loan requirements are quite flexible.
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Potentially Higher Interest Rates
Jumbo mortgage rates may be slightly higher than those on conforming loans, depending on the lender and your financial situation. However, many lenders can offer jumbo loan rates that are competitive with rates on conforming loans and some may even offer slightly lower rates depending on market conditions, so make sure to shop around.
Jumbo Mortgage On A Home Purchase
If youre buying a one-unit primary property with a loan amount of up to $2 million, youll need to have a minimum median FICO®Score of 680 and a minimum down payment of 10.01%.
The maximum debt-to-income ratio must be no higher than 45%.
If the primary residence has more than one unit or the loan amount is higher than $2 million, you may have slightly different credit score requirements, and youll need to make a higher down payment up to 25%, depending on the loan amount and type of occupancy.
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Qualifying Guidelines For Conforming And Jumbo Loans
Ultimately, its the size of the loan youre looking to finance that will determine whether youre looking at a jumbo loan or a conforming loan.
If your home loan amount is less than the specified conforming loan limit for your county, then you should qualify for a conforming loan as long as you meet the lending criteria.
However, if your home loan will exceed that loan limit, then you will require a jumbo loan and must meet jumbo loan qualifying criteria. Jumbo lenders set their own underwriting guidelines, so eligibility can vary from lender to lender, making it even more important to understand these rules.
While lenders have unique requirements for each loan type, here are the basic qualification standards for conforming and jumbo mortgages for 2021:
What Is A Super
A super-conforming loan is another name for a high-balance loan. Fannie Mae and lenders who chiefly sell their mortgages to Fannie Mae tend to prefer the high-balance terminology, while Freddie Mac and lenders who sell to it lean toward super conforming. Both denote loans in amounts that exceed the FHFAs national baseline conforming loan limit but fall within the maximum conforming loan limit for a county the FHFA designates as a high-cost housing market.
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Is It More Difficult To Qualify For A Jumbo Mortgage
Due to the increased loan size of these mortgages, the qualification process is more stringent. Every consideration from income, debt, credit score, down payment, is evaluated and there is typically more stringent financial requirements. While conforming loans have their underwriting requirements set by Fannie Mae and Freddie Mac, jumbo loans carry a higher risk for the lender, and the underwriting requirements are determined by each investor.;
How Does A Jumbo Loan Work
Like conventional mortgages, you can get jumbo loans in a variety of terms or repayment schedules, and they can be fixed-rate or adjustable-rate loans. At this time, Rocket Mortgage is only offering fixed-rate jumbo loans.
However, jumbo loans work differently than conventional mortgages. These loans have stricter requirements than other types of mortgages, and youll have to meet very specific property type, down payment, credit score and debt-to-income ratio requirements to get one.
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Who Needs A Jumbo Smart Loan
The Jumbo Smart loan is for those who are looking to buy a home that falls above local conforming loan limits which would normally be purchased by mortgage investors like Fannie Mae, Freddie Mac, the FHA and VA.
In most areas of the country, the limit for a single-family property is $548,250. Limits in high-cost areas are set at the county level and can be as high as $822,375. This latter number represents the single-family limit in Alaska and Hawaii as well. Conforming loan limits may also be higher if you have a 2 4-unit property.
For loans above your local conforming loan amount, youll need a loan that allows you to up your approval amount. Thats where Jumbo Smart loan comes in.
Effects Of Recent Events
Recent events constraining liquidity, securitization, and demand in the capital markets for structured debt securities have severely impacted the ability of conventional lenders to make loans larger than the Fannie Mae conforming loan limit . This is due primarily to the inability of most mortgage originators to sell or otherwise deliver large loans to investors. Unable to sell, the originating lender must then retain and service the loan utilizing their existing capital. The net effect has been an overall reduction in the Loan To Value permissible in a traditional super jumbo mortgage and an increase in the level of income documentation required for such large mortgages by comparison to the period from 2003 to June 2007, during which time the capital markets were willing and able to purchase these securities. The current constraints are leading mortgagors to make larger cash down payments to make up for the reduction in leverage currently being afforded, and a resurgence in the utilization of mortgages from private banks and other non-traditional and non-MBS lenders.
In response to the tightened lender guidelines for loans over $1,000,000, many borrowers are using specialty mortgage brokers to assist with these unique loans.
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How They Relate To Home Prices
As you might have guessed, jumbo non-conforming mortgage loans are generally used by people who are purchasing higher-end properties. By design, the conforming loan limits are usually set higher than the median home price within a particular county. In theory, this gives home buyers plenty of properties to choose from without having to venture into jumbo mortgage territory.
Related: High-balance loans for borrowers
In Clark County, Washington, for example, the median home value was around $458,641 in June 2021, according to Zillow. The conforming loan limit for the county is $548,250 for 2021. Thats well above the median value for a house in the area. Most other counties in the state work out the same way.
The Seattle metro area works the same way, though there are times when the median home price is higher than the conforming loan limit, which is the case right now. As of June 2021, the median home value in Seattle is $831,953, as per Zillow, and the conforming loan limit is $776,250.
Buyers in the Seattle area may have a more difficult time finding a suitable property within the conforming loan limits. Consequently, Seattle buyers will also be more likely to take on a jumbo mortgage loan when making their purchase .
To recap: What is a jumbo loan in Washington State? In most counties, its a home loan that exceeds the conventional / conforming limit of $548,250 for 2021. In the Seattle metro area, a jumbo mortgage loan is one that exceeds the elevated limit of $776,250.
Super Jumbo Loans The Really Big Ones
- Its a subjective term that may differ depending on who you ask
- A super jumbo used to be a loan amount above $650,000
- Now it might align with a loan amount beyond the high-cost limit
- Though it probably varies by region and company
Some jumbo loans are known as super jumbo loans, much to the excitement of mortgage brokers and loan officers who think theyve got a huge deal on their hands .
While there might be some argument, a true super jumbo loan is probably any loan amount above the high-cost limit for the county, ranging up to $20 million or higher.
This term is certainly relative, depending on the state in which the overzealous loan officer resides. I suppose it can vary based on where you live and what youre used to seeing.
When I worked in the business, a super jumbo was any loan amount over $650,000today it might be a loan amount of $1 million and up thanks to our friend inflation.
CoreLogic defines super jumbo as a loan amount between $10 and $20 million, and have identified over 230 active loans that fit that description.
They note that a whopping 75 percent of them were originated since 2013, a testament to recent sky-high property values.
Tip: You can break up your loan into a first and second mortgage to avoid paying more for a jumbo loan, keeping the first below the conforming loan limit. Just make sure the combined rate is cheaper than what it would be otherwise.
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The Difference Between Jumbo And Conforming Loans
For 2019, in most of the continental U.S., the conforming loan limit is $484,350. In Alaska, Hawaii, certain U.S. territories, and specific counties in the lower 48 states where home prices are exceptionally high, the limit can be as much as $726,525, or 150% of the national median. You can check the conforming loan limit for all U.S. counties at the FHFA website.
A mortgage for an amount greater than the local conforming limit is considered a jumbo loan.
Jumbo loans typically come with strict credit requirements and an even more rigorous review of applicant finances than conventional mortgages.
Cutting Down Payment Down To Size
Traditionally, you needed at least a 20% down payment in order to get a jumbo loan. This makes clearing the bar to homeownership much harder for those in areas that are particularly high cost.
The Jumbo Smart loan from Rocket Mortgage® lets you buy a home with a down payment of as low as 10.01% for a 1-unit property. If you want a 2-unit property, the minimum down payment is 15%.
While this is not insignificant, it does make things quite a bit easier if youre saving for a house.
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Why Are Jumbo Loan Limits Necessary
Conforming loan limits are set by the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, the two government-sponsored enterprises that buy a large portion of mortgages made in the U.S. from lenders and resell them on the secondary market to investors. These limits help lenders make more loans available to borrowers, since the lender can now sell them to the GSEs, mitigating risk if the borrower cant repay. Loans outside of the conforming loan limits, including jumbo loans, are riskier for lenders.
