You may have an idea of what a “large” mortgage means to you, but in the mortgage world, we have something called “jumbo” mortgages. These are mortgages that are so large, they are greater than the Fannie Mae or Freddie Mac conforming loan size which is normally $453,100 unless you’re in Rockingham or Strafford Counties where the limits are as high as $598,000.
Qualifying for a jumbo loan works the same way as a regular conforming loan in the respect that you have to meet program requirements for satisfactory credit, enough liquid savings (cash), enough income to repay the mortgage debt (capacity), and a satisfactory property (collateral).
- Credit – Most programs require you have a minimum FICO credit score of 640. A higher credit score will put you in a more favorable and lower interest rate program. For an optimum interest rate, work toward getting as close to a 740 FICO as possible.
- Cash – You need some. The down payment requirements are the biggest difference between a Conforming loan and a Jumbo loan. Where smaller loans for first-time home buyers require as little as $0 down, Jumbo loans require 10% to 20% down.
- Capacity – This has to do with what you have for income, what you have for debt, and what your capacity is to pay more debt, like a new mortgage payment. As a rule, you never want to pay more than 50% of your gross income toward debt: This is known as debt-to-income ratio or DTI. Some of the lowest rate jumbo programs restrict the DTI to 45%.
- Collateral is the property. You have to buy a home that is worth the price you are paying, it has to be in good condition, and it can’t have any health or safety hazards. That’s why you’ll want to have a home inspection and an appraisal before closing on the home.
Find out how much you qualify for as part of the mortgage qualification process. It starts with a phone conversation to discuss your current income and monthly debts. From there, we’ll explain what your best mortgage program choices will be and how much home you can qualify for. If you’re ready to explore large mortgage qualification, just email me.