Jumbo Mortgages Are Alive and Well
By Patricia M. Gonzalez
Borrowers need to do their homework when shopping for a jumbo mortgage. Although the lending environment today remains constrained when compared to the boom of the early to mid 2000s, jumbo mortgages are still out there.
A jumbo mortgage is a loan amount greater than $417,000. Since Fannie Mae and Freddie Mac do not buy jumbo mortgages, they are rarely sold on the secondary mortgage market. Jumbo mortgages originated today will likely remain on a bank’s balance sheet for the foreseeable future. This means that a bank’s chief concern is whether the loan is prudent relative to the borrower’s credit history, documented income and the transaction characteristics – not whether the loan will meet someone else’s standards for sale. This represents a return to traditional lending before securitization became the norm.
Today, if you want a jumbo mortgage, you should prepare for the following:
• Have a down payment of at least 20%.
• Have your monthly debt payments be no more than 38-45% of your gross income.
• Be able to document your income.
• Have a good credit score.
• Be comfortable with an adjustable rate mortgage. Fixed rate jumbo mortgages are relatively rare.
Pricing may vary among banks, but what is more important is a bank’s underwriting criteria and ability to close your transaction on time. Community banks and smaller regional banks can be great sources for jumbo mortgage lending. Their underwriting criteria can be more flexible than that of a large national bank and they typically have much less bureaucracy to slow down the process. Smaller banks will take a look at the whole loan as well as the potential deposit relationship which may follow.
Patricia M. Gonzalez – Mortgage Banking Officer – NMLS# 648001– (305) 799-5328