Jumbo Home Loans – Are they Hard to Get?

If you need to borrow more than the conventional loan limit in Florida (currently $726,200 in most of Florida), you need a jumbo loan. The name says it all - these loans are for much higher loan amounts, but they have other differences too. 

Jumbo loans usually have tougher qualifying requirements because lenders take such a high-risk lending to you. 

What are Jumbo Home Loans? 

Any loan over the limit of $726,200 in Florida is a jumbo loan. That’s the federal limit all entities will guarantee or sponsor, including Fannie Mae and Freddie Mac. Without the guarantee, lenders put themselves out on a limb. They lend you the money with no one to back them up in the event that you default. 

So what does that mean for jumbo home loan applicants? 

Typically, most lenders require that you be the ‘perfect’ borrower to prove you qualify for a jumbo loan in Florida. 

Different than a conventional loan – Jumbo mortgage home loans are not guaranteed or sponsored by Fannie Mae, Freddie Mac, FHA, USDA or the VA.  Lenders take all the risk.  As such, qualification standards tend to be tougher than that of Conventional, FHA, VA or USDA home loans. 

Expect higher-than-conventional interest rates – jumbo lenders are usually picky with credit history/score, employment history, and especially debt ratios (i.e. - your ability to repay the new monthly payments).  

How do you Qualify? 

So what is a ‘perfect' borrower?  Here’s what lenders typically want:

• Perfect credit including a high credit score and unblemished credit history

• No major past credit events (especially foreclosures, bankruptcies, short sales, deed-in-lieu of foreclosure)  Our jumbo programs are typically more flexible on these events, but more on that later. 
• Timely mortgage payment history for the last several years
• Large down payment of around 30% or more6 – 12 months of reserves (mortgage payments you keep in a liquid account after closing for a rainy day)

Jumbo loans are typically available on owner-occupied homes, second homes and even investment homes. 

What can you Expect? 

Since jumbo loans are for a higher amount, you’ll have a higher mortgage payment just looking at the principal and interest. Speaking of interest, jumbo loans typically have interest rates much higher than conventional loans, again to make up for the risk of the lack of guarantee. 

Most jumbo loans also aren’t fixed rates – they are adjustable rate mortgages. This means your interest rate will change once annually after the initial fixed period of 3 – 7 years. The rate changes according to the chosen index, such as LIBOR of the 10 Year Treasury Bill (T-Bill).   There are protections called "caps" that are designed to ensure that if your interest were to rise, that annual increases are done incrementally, meaning that it doesn't jump so significantly that it causes the home to become unaffordable.    

Our jumbo loans don’t have prepayment penalties for Owner Occupied Homes or Second/Vacation Homes, though, which gives you some flexibility as you manage your money. If you decide to pay the loan off in full rather than paying the interest, you can without worrying about a prepayment penalty.  

There can be a pre-payment penalty on certain jumbo loans, but only if the home is being used for Investment purposes.  In that case, the prepayment penalty can be negotiated when the loan is originated, so always ask your loan originator about prepayment penalties if you're getting a loan for investment purposes so they can discuss your options. 

Other Options

If you’re worried that you don’t have perfect credit or you have non-traditional income and you won’t qualify for a loan, we offer a couple of other jumbo loan options. 

Private Client Portfolio Program

Our Private Client Portfolio loan is meant for the affluent client, and helps applicants with a great credit history but may have unconventional income. For example, if you are financially independent and live off your assets, you can more than afford a mortgage payment, but because you don’t have ‘traditional’ income that lenders can verify with a W-2, they may turn you down. 

Our Private Client Portfolio program caters to situations just like this. In fact, you don’t need perfect credit to qualify. A HUMAN underwriter will evaluate your application and qualifying factors to determine if you qualify. 

We don’t rely on computer approvals because we know people in your situation will automatically get turned down, even though you can more than afford the loan. Our Private Client Portfolio loan is available in loan amounts up to $3 million and is offered as an adjustable-rate loan as a 5 or 10 year ARM, meaning that the payment is based on a 30 year payment schedule, with the interest rate fixed for the first 5 or 10 years, and later becoming adjustable once annually. 

While you need decent-sized reserves (24 months of debt), you can use your asset depletion to qualify for the loan if you don’t have standard income, even if you just became self-employed. You can even close the loan as a trust or LLC. 

Jumbo Flex Loans

If you’re looking for a more flexible jumbo home loan program, the Jumbo Flex Home Loan is a good option. Perfect for borrowers with credit scores as low as 600, we offer several types of income verification options:

• ​If you can provide full income documentation (paystubs, W-2s, and tax returns), you can get a jumbo loan with a credit score of as low as 600.  
• If you live off of your liquid assets and/or file little or no income on your Federal income tax returns, we can also use these liquid assets as income using our Asset Based Income approach to help you qualify. 
• If you’re a self-employed business owner, we can use: 
• Bank Statement Program - this program allows the lender to use the ordinary business deposits from your business bank statements instead of using the after-tax income from your tax returns. 
• P&L (Profit and Loss) Statement Loan Program - which allows us to the use the net income from a Profit & Loss (P&L) statement prepared by a licensed tax professional.
• 1099 Home Loan Program - designed for independent contractor and employees earning 1099 wages, which allows the lender to use up to the full amount of income on the 1099's instead of the net income approach using tax returns.

Our Jumbo Flex program is flexible in terms of recent credit issues too, including prior bankruptcy, foreclosure, or short sale. Some applicants can be approved as little as one day after the event, but it varies by borrower and the situation. 

Jumbo Flex Home Loan applicants need a down payment between 10% - 35% , but no loan, no matter the size of the down payment requires PMI. You can borrow from $150,000 - $3 million on a 30-year fixed, 5 or 10 year ARM.  

Bottom Line 

If you need a mortgage for more than $726,200, you have fewer options than borrowers who need to borrow less. Without perfect credit and a low debt-to-income ratio, you may have trouble finding a suitable loan. 

We work hard to provide our borrowers with the loans they need, this includes loans for high net-worth borrowers who can afford a mortgage, but may not qualify the traditional way. Our large selection of jumbo mortgage loans gives you options to be able to buy the home you want without depleting your assets. 

Leverage the benefits of a mortgage loan with one of our three great jumbo loan programs, and become the homeowner of the perfect home in Florida.  Remember, if you've applied--and been denied--by a bank or credit union, stop letting these banks tell you NO when we have more reasons to say YES.

WRAPPING UP...

As always, if you’re looking to purchase, refinance or get preapproved to purchase a home anywhere in the state of Florida using JUMBO financing, we’d love to help.  Simply give us a call so we run some numbers for you and answer all your questions! 

You can also drop us a line HERE »

Yours in successful homeownership,

Derek Bissen
Loan Originator
NMLS#365627
Unconventional Lending Program Director