Jumbo loans are more costly than standard mortgages, but their higher loan amounts allow you to purchase a larger home. Furthermore, these loans are flexible enough for use on any type of property – from your primary residence to vacation or investment properties – regardless of its cost.
How to Qualify for a Jumbo Loan
In general, the minimum credit score needed for a jumbo loan is usually around 720 or higher. While this may seem high, it’s achievable and an excellent minimum to strive for.
Lenders take into account several criteria when approving a jumbo loan, including your debt-to-income ratio (DTI), which is the amount owed divided by monthly income. A lower DTI may make it simpler for you to qualify for the loan and save you money in the long run.
Debt-to-income requirements for jumbo loan applicants differ between lenders. Generally, most jumbo lenders require that your DTI (debt to income ratio) be at or below 43%.
Lenders also take into account the cash reserves you have in your bank account when making a jumbo loan. A significant down payment is usually required, and you need enough money for an initial year’s worth of payments if necessary.
With a large down payment, your jumbo mortgage payments become more manageable and your interest rates decrease. If you don’t have enough funds for a down payment, an interest-only jumbo mortgage is an option; this allows you to pay only the interest on the loan during its early stages of repayment.
Accepting a jumbo mortgage can be an intricate process, but not impossible. As long as you understand the qualifications, there will be lenders willing to work with you in order to meet your requirements.
Finding a lender offering jumbo loans is easy when you search Zillow. Here, you can connect with local experts in this field near you.
You may ask your mortgage agent for a recommendation of a lender offering jumbo loan products. Most of these professionals would be more than happy to explain the details of how a jumbo loan operates and how to apply for one.
Jumbo loans can be an attractive option for home buyers with higher credit scores, but they may not be suitable for everyone. Due to stricter eligibility requirements and higher costs associated with them, people with lower credit scores may find it more challenging to qualify.
Your down payment must equal at least 10% of the total home price, so it’s essential that you can come up with that much in savings. If not, you might want to consider taking out a second mortgage for additional assistance.
In addition to the down payment, borrowers must possess a satisfactory credit history. Banks tend not to lend money to those with poor credit histories. You can improve your score by paying bills on time and keeping credit balances low.