Million Dollar Mortgage: Is Your Financial Profile Ready for a Jumbo Loan?
Are you searching for the right jumbo loan that fits your current needs and long term goals? Do you prefer to have options and choices?
You already know Jumbo loans are a financial instrument for a larger, more complex transaction. And you’re not just shopping for a house; you’re interested in making this investment work for you now and continuing to work for you down the road.
You want loan options and choices.
The loan you choose needs to reflect your investment strategies and not just be whatever program a bank happens to offer.
My goal as a mortgage broker is to give you a clear, no-nonsense look at several options to accomplish your goal and to make sure you’re getting the best deal that works for you now and in the future.
First up, let’s talk about requirements. You may already know your credit score, but if not, we’ll get to that soon enough. Just know that for a jumbo loan, it needs to be top-tier, usually 740 or higher. If it’s not for any reason, we still may have helpful options for you to consider.
Your debt-to-income (DTI) ratio also is carefully looked at. Lenders want to see that you have a comfortable margin to handle the higher payments, so expect the DTI limits to be tighter than they are with a conventional loan.
Cash reserve requirements. You’ll need to have enough liquid assets to cover several months of mortgage payments after you’ve satisfied the closing costs. This is a requirement that proves to the lender that you’re a serious borrower and have the financial stability to weather any storm. The number of months of reserves varies per scenario and by lender.
The good news is that cash reserves can mean more than just cash in the bank. The most common liquid assets that also qualify for jumbo loan reserves, starting with the basics are:
Checking and Savings Accounts: The most direct and liquid form of reserves. Lenders will require a history of bank statements to verify the balances over time.
Stocks, Bonds, and Mutual Funds: Investment accounts such as these are generally considered liquid and are often counted as reserves. Lenders may not count 100% of the value, however, to account for potential market volatility. They may apply “a haircut”, so to speak so be prepared for a portion of the value to be considered.
Vested Retirement Accounts: Funds in accounts like a 401(k), 403(b) or IRA’s can often be counted as reserves, but only the vested portion. Lenders understand that you’re not going to liquidate these assets, but they serve as a measure of your overall financial strength. Here also, they will typically consider a certain percentage of the vested value.
Certificates of Deposit (CDs): While not as immediately liquid as a checking account, CDs are a safe and reliable asset that can be easily converted to cash, making them acceptable as reserves.
Cash Value of a Vested Life Insurance Policy: The cash value that you can access from a life insurance policy can also be counted as a reserve.
It’s important to note that specific requirements can vary, sometimes significantly, by lender. Some will have stricter rules about what they will accept or the percentage of the asset’s value they will count while others may not be as strict. When you are shopping for a jumbo loan, it’s crucial to determine the specific reserve requirements with your broker to ensure your assets meet the criteria of the potentially selected lender(s).
Now, on to the numbers. The interest rates on jumbo loans have become much more competitive, but they still operate a bit differently. Being the savvy borrower that you are, you’re looking at the full picture—the APR—and not just the advertised interest rate. The APR includes the fees and loan costs, giving you a truer sense of a particular loan’s overall expense.
When comparison shopping, you know to always look at and compare the APR while remembering the closing costs, which can be higher due to the larger loan amount and the additional underwriting work. Sometimes, buying down your rate with points makes sense, but do the math first to see if the long-term savings outweigh the upfront cost. It’s all about a custom-made financial strategy.
So, how do you make your jumbo loan application reflect the professional that you are to ensure a smooth process? You need to present a complete, well-organized financial file that demonstrates your income, assets, and employment history with absolute clarity. For those of you who are self-employed, this means having multiple years of tax returns ready to go. Your mortgage broker will advise you on what is needed.
As your mortgage broker, we’ll put together a complete and thorough application package that addresses potential questions before they’re even asked. We’ll show the lender you’re not just a qualified borrower, but a rock-solid investment. Being organized and providing your broker with the requested financial documents in a complete and timely manner helps to ensure a smooth transaction.
Are you ready to start your jumbo loan application? Call me, and let’s get started putting together a strategy that works for you. Let’s get you ready to buy that dream home you’ve been working to achieve with a loan that’s just as strong as your financial standing. Let’s Go! Let’s get it done! Joe Bechtold, 630-456-2368 direct.
