Jumbo loans and mortgages are similar to traditional mortgages, only they are larger. Some would argue that the name is somewhat silly seeing that these mortgages are typically a higher-end type borrower but the name has founds its place within the mortgage industry. Generally speaking in most markets, any mortgage over the $417,000 Conventional limit is considered a non-conforming or jumbo mortgage. There are some exceptions in “high cost” areas of the country but for this article we will stick to the standard $417K+ realm for finding the best jumbo lenders.
Best Jumbo Lenders – Guidelines to Watch Out For:
Due primarily to the higher loan amount and overall risk of these these mortgages, jumbo loans typically come with more stringent lending guidelines than their Conventional counter parts. First, the down payment(or equity, on a refinance) requirements are generally more strict, typically 20%-25% down at a minimum. Next, expect the debt-to-income ratios to be a bit more restrictive than a Conventional loan. Another aspect that is different will be the cash “reserve” requirement. Typically lenders will want to see at least 6-12 months worth of mortgage payments in the bank, in liquid form. This helps ensure that the borrowers can continue making payments if something unexpected were to occur such as a job loss, large home/auto repairs, or any other emergency which may cause money to get tight for a stretch. Even the best jumbo lenders may also require additional documentation, such as three years worth of tax returns vs just two, additional asset statements, and often times additional documentation pertaining to corporate entities owned by the borrowers.
Best Jumbo Lenders – About Interest Rates?
As you may expect, jumbo loans typically carry a bit higher interest rate. This is not only due to some added layers of risk, but also because they are generally “portfolio loans” or mortgages retained by the lending institution after closing and not sold in the secondary market. Because portfolio loans are “shelved” and retained, the loss is much greater if a borrower were ever to go into default. For this added risk, the interest rates are generally anywhere from .25% – 1.00% higher depending on the loan term and other layers risk factors. This sometimes can work to a jumbo borrower’s favor, however. Since the portfolio lender has full control over structuring the loan, they may sometimes grant special ultra-low interest rates to very well-qualified borrowers and/or borrowers who also happen to have large asset accounts with their lending institution. That being said, you can sometimes put your current bank among the best jumbo lenders by virtue of simply having large asset accounts there and being on their “VIP list” of sorts.
Remember, sometimes your best place to find the best jumbo lenders is your own local bank. If you have large asset accounts at a local bank, or you can move some money there, it is quite likely that bank may grant you special rate incentives on your mortgage in return.
In conclusion, jumbo loans are just larger mortgages with more strict guidelines and slightly higher interest rates. Though they are often times “portfolio loans” retained by the lending institution, the process for obtaining a jumbo mortgage is generally the same as that of a Conventional loan.
Author Brad Troendle of PNC Bank is a seasoned mortgage professional dedicated to bringing his subscribers relevant and useful information on how to compare jumbo mortgage rates. Want a free jumbo mortgage quote? Check out the following link for more a FREE consultation and expert advice on helping you identify the best jumbo lenders.