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A Comprehensive Guide on Jumbo Loans | Dallas Mortgage Company

There are numerous types of loans available, which are imperative to know about when you’re purchasing a home. 

Jumbo loans are a common type of loan. Knowing about such loans is crucial before you head over to discuss your mortgage needs with a Dallas mortgage company.

Therefore, this article is going to be your ultimate Jumbo Loans guide. And will tell you everything you need to know about this type of loan and how it works. 

What is a Jumbo Loan?

A jumbo loan is a type of home loan and mortgage used to finance homes that have prices higher than most loans can cover.  In short, if you have your eyes on a house that is costing you more than $548,250, and if you don’t have this amount in your bank account or savings. Then this is when you’ll be required to consider a jumbo loan.

This type of loan is not insured by the government and can exceed limits that have been set by the Federal Housing Finance Agency (FHFA). 

Such limits are set by Fannie Mae and Freddie Mac, which are government-sponsored enterprises that purchase and securitize mortgages and home loans. Therefore, jumbo loans are not like conventional loans, and cannot be bought, guaranteed, or securitized.

Unlike most loans, jumbo loans have comparatively stricter underwriting guidelines. These strict guidelines usually consist of much tighter and stricter debt ratio requirements. Larger reserve requirements, tough credit standards, and a greater amount of down payments.

If we talk about jumbo loans in Dallas, Texas, the conforming loan limit is approximately $548,250. Therefore, any loan that is greater than this amount, is referred to as a jumbo loan.

Apart from the size of jumbo loans, there are several. Other factors that make it different from other loans out there. 

For instance, other loans may require lower down payment rates. However, in most cases, jumbo loans can require at least a 20% down payment. 

Moreover,  jumbo loan rates may be a little higher than other loans out there, due to the potentially higher interest rates. Lastly, you can expect higher closing costs and other fees at the closing table for jumbo loans.

How to qualify for Jumbo Loans?

As mentioned before, the guidelines are much stricter in the case of jumbo loans. Than are for ordinary loans you might choose to finance your house with. 

This is because of the fact that these loans are typically in larger amounts than other loans, which makes it comparatively riskier for lenders who are giving you that loan to help you finance your home, as more money is involved and there is no guarantee by Fannie Mae or Freddie Mac.

Here are ways you can successfully qualify for a jumbo loan in Dallas, Texas:

Rigorous credit requirements and score

The lender will take a close look at your creditworthiness. And that will help them decipher if you are credible enough to be lent a large loan to help finance your home. The higher your credit score, the more potential you will have to receive that jumbo loan. In most cases, your lender will ask you for your FICO score. In order to receive a jumbo loan, you will be required to have a FICO score as low as 700, and high as 720.

Stellar debt-to-income ratio

Your lender will also take a look at your debt-to-income ratio (DTI) in order to determine whether you’ll actually be able to pay and manage your monthly payments, and also if you can repay the loan in the future. Your debt-to-income ratio is your total debt payments divided by your gross monthly income. In most cases, lenders have 45%.

Cash reserves

Your loan lender will have to take a look at the cash in your bank, in order to determine if you actually have an ample amount of cash in your reserve. In most cases, your lender will not need to take a look at your entire cache reserves. They just need to be sure enough that you have an adequate amount of money and cash in your bank account by which you can easily pay at least one year of your mortgage payments.

Other formalities and documents

In order to qualify for a jumbo loan, your lender will also ask you to prove your financial health. To do this, you will need to provide your lender with numerous formalities. In most cases, your lender will ask you for your bank account statements, years of tax returns. Specifically W-2s and 1099, and investment accounts, if you have any.

Appraisals

Your loan lender will need to know the value of your property. So, he may ask you for a second home appraisal, for the home or property you are planning to buy with this jumbo loan.

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