Jumbo Home Loans

Basics of Massachusetts Jumbo Home Loans

A Jumbo, or non-conforming loan, is required for financing on a mortgage that is higher than the conforming loan limits set by Fannie Mae and Freddie Mac.

According to Wikipedia:

In the United States, a jumbo mortgage is a mortgage with a loan amount above conventional conforming loan limits. This standard is set by the two government-sponsored enterprises Fannie Mae and Freddie Mac, and sets the limit on the maximum value of any individual mortgage they will purchase from a lender.

Fannie Mae (FNMA) and Freddie Mac (FHLMC) are large agencies that purchase the bulk of U.S. residential mortgages from banks and other lenders, allowing them to free up liquidity to lend more mortgages.

How Do Lenders View Jumbo Loans?

Mortgage bankers / lenders consider jumbo loans to be a riskier proposition than conventional loans due to the fact that a larger sum of money is ‘bet’ on a single transaction vs spreading that same dollar amount across multiple transactions.

For example, there is a big difference between lending on one $3million loan vs ten $300,000 loans. On several smaller loan amounts, the lender is essentially spreading its risk over multiple properties and borrowers. This risk associated with Jumbo mortgages is why the mortgage rates and down payment requirements are typically more than a traditional conforming loan.

Qualifying For a Jumbo Mortgage:

Business / Employment –

Whether you’re qualifying for a $500,000 mortgage, or a $5 million mortgage, there is obviously going to be a sizable monthly mortgage payment that the underwriter will want to be sure you can afford over a long period of time.

It’s important to be thorough in explaining what you do for a living, the health of the industry and the likelihood of continued employment.

A company web site, business licenses (self-employed) and other relevant information are important things to include with a loan application.

Some underwriters may even search for your name or company on Google, so it’s smart to have an idea of what type of results and impression they’ll find if they choose to do a little extra digging.

Assets –

Documentation of assets is critical, and they have to make sense in relation to the income stated on the application.

For example, if the borrower states an income of $50,000 a month, then there should be sufficient assets and investments to back it up. If there are any large expenditures or deductions from checking accounts, make sure to have a paper-trail or letter of explanation that clearly details the nature of the transaction.

Credit Scores –

In addition to having high scores and proof of a responsible borrowing history, underwriters may also look for other sizable debts that that the borrower has had a positive experience managing or paying off. Public records and IRS issues will need to be thoroughly documented and explained.

Property –

The landscape has changed for appraisals, so don’t be surprised if multiple appraisals are required for financing approval on the property.

Profiling –

Basically, the overall borrower profile and supporting qualifying documentation has to make sense to an underwriter. Especially pertaining to the high net-worth world, the borrower’s lifestyle, assets, credit history and income potential should follow a similar pattern of others who take on the liability of large mortgage debts.

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The jumbo and super-jumbo mortgage financing industry is always in a state of flux as the supply and demand for these particular loan products can change due to outside market conditions.

A good rule-of-thumb to remember when trying to qualify for a non-conforming loan is to have your paperwork organized, as well as a good explanation prepared for anything that may raise potential questions by an underwriter about your ability to repay the mortgage over the term.

About Massachusetts Jumbo Home Loans

A Jumbo mortgage is a home loan in an amount above conventional conforming loan limits. There are two government-sponsored enterprises known as Fannie Mae and Freddie Mac that set these standards and the limit on the maximum value of any individual mortgage they will purchase from a lender.

Fannie Mae and Freddie Mac are large agencies that purchase the bulk of U.S. residential mortgages from banks and other lenders, enabling them to free up liquidity to lend more mortgages. Because of Freddie Mac and Fannie Mae limits not being able to cover the full loan amounts, they then referred to the loan as “Jumbo Mortgage”.

Jumbo mortgages known as Jumbo home loans are bigger loans that cannot be sold to Fannie Mae or Freddie Mac because they exceed the agency’s conforming limits. Jumbo home loans are non-conforming because they because they exceed the established lending limits.

Jumbo loans are considered to be more of a risk for mortgage bankers and lenders as opposed to a conventional loan, due to the larger sum of money that is involved in a single transaction instead of spreading the same amount into multiple transactions.

Whether you are trying to qualify for a $500,000 mortgage, or a $5,000,000 mortgage, there is most likely going to be a pretty large monthly mortgage payment that the underwriter would want to make sure that you would be able to afford it over a lengthy period of time.

Asset Requirements

Document for assets is highly important, and they have to make sense in relation to the income that is stated on the application.

For example: if it is stated on there that the borrower has an income of $60,000 a month, then there should be a sufficient amount of assets and investments that can back it up. Make sure to have a paper-trail or a letter explaining any large expenditures or deductions from checking accounts that clearly states details of such transactions and what the nature of it was for.

Eligible Property

There may be multiple appraisals involved, since landscape of Jumbo has changed. This is required for financing approval on the property.

Pretty much the overall borrower profile and supporting qualifying documentation has to make sense for the underwriter. Especially when it comes to the high net-worth world, such as; lifestyle, assets, credit history and income potential should follow a similar pattern of others who take on the liability of large mortgage debts.

The Jumbo and Super-Jumbo mortgage financing industry is always so flux as the supply and demand for the particular loan products can change due to the outside market conditions.

A good thing to keep in mind is, when qualifying for a non-conforming loan is to have your paperwork organized, along with good explanations for anything that might come up such as, questions that an underwriter might throw at you in regards to your ability in repaying the mortgage over the term.