how a jumbo loan works
like traditional mortgages minimum requirements for a jumbo mortgage have become increasingly stringent since 2008 to get approved you ll need a stellar credit score 700 or above and a favorable debt to income dti ratio as of 2022 the dti is tied to the price of the property and its lien position although they are nonconforming mortgages jumbos still must fall within the guidelines of what the consumer financial protection bureau considers a qualified mortgage a lending system with standardized terms and rules 3you ll need to prove you have accessible cash on hand to cover your payments which are likely to be very high if you opt for a standard 30 year fixed rate mortgage specific income levels and reserves depend on the size of the overall loan but all borrowers need 30 days of pay stubs and w 2 tax forms stretching back two years 4 if you re self employed the income requirements are greater two years of tax returns and at least 60 days of current bank statements the borrower also needs provable liquid assets to qualify in addition to cash reserves equal to six to 12 months of the mortgage payments all applicants must show proper documentation on all other loans held and proof of ownership of nonliquid assets like other real estate jumbo loan rateswhile jumbo mortgages used to carry higher interest rates than conventional mortgages the gap has been closing in recent years today the average annual percentage rate apr for a jumbo mortgage is often par with conventional mortgages and in some cases actually lower as of december 29 2023 wells fargo for example charged an apr of 6 328 on a 30 year fixed rate conforming loan and 6 464 for the same term on a jumbo loan 5even though the government sponsored enterprises gses can t handle them jumbo loans are often securitized by other financial institutions since these securities carry more risk they trade at a yield premium to conventional securitized mortgages however this spread has been reduced with the interest rate of the loans themselves down payment on a jumbo loanfortunately down payment requirements have loosened over the same time period in the past jumbo mortgage lenders often required homebuyers to put up 30 of the residence s purchase price compared to 20 for conventional mortgages now that figure has fallen as low as 10 to 15 6 as with any mortgage there can be various advantages to making a higher down payment among them to avoid the cost of the private mortgage insurance pmi that lenders require for down payments below 20 who should take out a jumbo loan 