May
07

Bigger Loans = More Hoops to Jump Through

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Jumbo loans, for most lending institutions, are defined as mortgages over $625,500, and they come in three sizes: small, medium and large. Face it if you’re buying in New York City and need a mortgage, you’ll likely be seeking one of these jumbo loans.

While several banks offer these Jumbo Loans, the may have different requirements.  For Example

  • EverBank offers a Jumbo Loan up to $1.5M and requires a 20% down payment, and 12 months of cash reserves; a loan from 1.5M to 2.5M requires a 30% down payment and 18 months cash reserves; and over $2.5M requires $35% down and 2 years of cash reserves.
  • Bank of America offers a jumbo loan up to $1M with a 20% down payment; a $2.5M to $5M loan with 30% down; and $5M+ loans require a 35% down payment.
  • Wells Fargo Home Mortgage has several tiers starting at $417,000 to $2M with 20% down payment and 12 months cash reserves.  After that, for every $1M above the $2M requires an extra 5% down and additional cash reserves.

While most lenders build in some flexibility to their loan programs, expect to see credit score requirements of 720 and above and debt-to-income ratios of 40% to 43%.  You might be able to get more favorable terms if you have a strong financial profile.

Some other things to think about:

  • Relationship:  The first place to look is the lender where you do the majority of your business.  If you have a strong relationship with your lender already, they may be more likely to relax their requirements.
  • Identify liquid assets:  Some lenders will accept assets such as stocks that can be liquidated easily if the borrower does not have sufficient cash reserves to meet the tier requirements.
  • Shop sooner rather than later:  The new Consumer Financial Protection Bureau rules go into effect in early 2014.  These protections will tighten standards for verification of borrower income or assets and make interest-only loans difficult or impossible for many borrowers to obtain.

Based on Wall Street Journal article by Anya Martin

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