Jumbo Loans for High-Value Homes
A jumbo loan is a type of conventional loan that doesn’t conform to maximum loan amounts set by government-sponsored entities (GSEs) Fannie Mae and Freddie Mac. These are popular loans for investment properties, primary homes, and secondary homes. Also known as nonconforming loans, these mortgages are typically reserved for clients in great financial standing with a high credit score. They have widely varying terms and rates, depending on the value of the loan, the location of the home, and the borrower’s financial status. If you’re interested in purchasing a high-value home in Annapolis, MD, Brian Masterson – Bay Capital Mortgage is an experienced home financing professional who can help. Brian works with several top lenders to find clients the most competitive rates and terms that work for them. Read on to learn more and contact us with any questions.
What Makes a Loan Nonconforming?
There are two basic divisions of mortgages: conventional and nonconventional. Nonconventional loans are secured, in part, through departments of the federal government like the FHA and VA. Conventional loans, conversely, are fully funded and insured through private companies. GSEs purchase many conventional loans from lenders, taking them off the lenders’ books and freeing them up to make more loans. Fannie Mae and Freddie Mac set limits on which loans they purchase, which is where conforming and nonconforming loans come in.
Nonconforming loans exceed Fannie Mae and Freddie Mac limits, which vary according to the county in which you live. These limits can change every few years. In Anne Arundel County for 2018, those limits are:
- $517,500 for a one-unit home
- $662,500 for a two-unit home
- $800,800 for a three-unit home
- $995,200 for a three-unit home
Jumbo Loan Benefits and Basics
If you want to buy a home that exceeds these limits, lenders will end up keeping your loan on their own books, which means they carry a slightly higher level of risk. This means more stringent credit and other qualifying requirements. Every loan is different, but basic eligibility requirements include:
- At least a 700-720 credit score
- A low debt to income ratio (DTI) of 40-45%
- A substantial amount of cash reserves showing your ability to make monthly payments
- A down payment of at least 20-30%
- Documents showing your financial stability, like at least two years of W-2s, full tax returns, and bank statements
Jumbo loans come with terms varying from just a few years to 30 years and can have fixed or adjustable rates. In many cases, these mortgages have higher interest rates than conventional loans, but you can still find competitive rates depending on market conditions. You’ll also likely encounter higher closing costs due to the high value of the loan itself.
If you’re interested in learning more about jumbo loans and shopping rates, Brian Masterson – Capital Bay Mortgage is a local Annapolis mortgage agent you can trust. Brian has the local expertise you want and the power of national lending partners. Contact us to get started.