So you finally decided to buy a property, that dream house of yours. You know your exact preferences and already have a fat savings account from working a corporate job and is ready to be a responsible homeowner.
But what if the investment on a property such as a dream house costs more than the loan limit that a traditional mortgage can provide? This means your dream home purchase is within the Jumbo Loan Limit Texas. But are you ready for a Jumbo Mortgage? What are the things you need to know before you invest in a property?
Jumbo Mortgage Loans have stricter qualifying requirements mainly because they are a lot riskier than traditional mortgages. To determine if you’re ready for a Jumbo Mortgage Loan, here are some points you need to know.
Good Credit Report And A Good Credit Score
Your credit history says a lot about you as a borrower. If you’re responsible enough in paying your dues, it will surely show in your credit report. Your credit score determines the level of future risk you can be if lenders extend a mortgage offer. For Jumbo Loans, most lenders will require at least 700 FICO score to qualify.
A Low Debt-To-Income Ratio
Traditional mortgages will approve your loan approval if your DTI ratio is 45%. Since Jumbo loans have a larger loan amount, you need a low Debt-To-Income Ratio, not more than 43%. Some will even require you to have less than that to make sure you can pay your monthly mortgage.
For government-backed home loans, you can get a mortgage with up to 97% LTV value if the minimum down payment is 3%. For Jumbo Loans, and most lenders accept a maximum of 85% LTV ratio for 15% down payment.
Down Payment Requirements
Before, you need 20%-25% down payment to qualify for a Jumbo Mortgage. Nowadays, lenders are more forgiving and can lend you a jumbo loan even if you can only give 15% down. Some are also accepting 10% down payments.
Private Mortgage Insurance
Lenders will ask you to pay Private Mortgage Insurance when you apply for traditional home loans with less than 20% down payment. However, some lenders are willing to waive PMI fees even if your down payment is less than 20%.
Enough Liquid Cash Reserves
Mortgage lenders will check if you have enough cash reserves for the loan. Typically, you’ll need at least 6 to 8 months worth of your monthly mortgage. This will cover your housing expenses which includes payment for monthly PITI or Principal, Interest, Taxes, and Insurance in case you run into an emergency.
Good Read: The Four Components of PITI
These are the standard requirements for jumbo loans that one should take note as a corporate employee before engaging in property investment. Aside from these, you’ll need to provide a substantial amount of financial statements to your lender.
Remember that Jumbo Loans will require more paper works than a traditional mortgage. With a larger loan balance at stake, lenders will want to ensure you can manage to pay them back. Just because you qualify for a jumbo loan already means you should get one. Searching for other options before making a final decision is wise.