Financing a luxury home in and around Wichita means obtaining a jumbo loan. For any mortgage loan above the current conventional loan limit of $417,000, lenders refer to these larger amounts as a jumbo mortgage. Getting approved for a jumbo loan is very much the same as getting approved for most any mortgage type as lenders evaluate a borrower’s credit history, the ability to repay the debt, employment and sufficient funds to close on the transaction.
Most jumbo loan programs require a minimum 20 percent down payment although there are select programs that permit up to 95% financing, only 5% down payment in some cases. In Wichita and the surrounding areas in Sedgwick County, the jumbo market is approximately 0.5 percent of available homes for sale although the trend for higher end developments is definitely on the upswing.
When buyers consider how much they want to put down on a purchase a visit with their financial planner is probably in order. As funds are taken from a liquid account and used as equity in a purchase transaction those funds are essentially locked into the property. Real estate can be sold and capital recovered but tapping into that equity later means obtaining a home equity line of credit. That said, many who finance a jumbo purchase decide it’s best to keep as much cash in their savings and retirement accounts as possible and leverage the purchase as much as possible. Another important factor is the historic low interest rates we see today.
Borrowers who wish to make a 10 percent down payment instead of the full 20 percent down do have options. There are plenty of jumbo loan programs up to $2,500,000 that require only a 10 percent down payment. Such loan programs may have slightly higher rates compared to a loan with a 20 percent down payment, so the tradeoff should be carefully considered. A jumbo loan with 10 percent down can also require a separate mortgage insurance policy in some cases, creating a higher monthly payment.
Mortgage insurance is in fact a true insurance policy that covers the difference between a 10 and 20 percent down payment. For example, a couple decides to buy a home listed for sale at $800,000. A 10 percent down payment is then $80,000 and a 20 percent down payment is $160,000. With a mortgage insurance policy, should the couple go into default, the lender is compensated for the difference in down payments. Most mortgage loans of any type require mortgage insurance in some form if the mortgage is greater than 80 percent of the value of the home. With just 10 percent down and the mortgage is 90 percent of the sales price, mortgage insurance will often be required.
That is unless the borrowers takes out two mortgages to avoid PMI. For those who want to put down just 10% or even 5% down. This transaction also involves two mortgages, one at 80 percent of the value and a second mortgage at 15 percent. Lenders refer to this scenario as an 80-15-5, where 80 represents the loan to value of the first mortgage, 15 the second and the 5 is the amount of down payment. Again, we can help you decide which is the better option. But for those borrowers who wish to hold onto as much cash as possible when financing a luxury home, the 80-15-5 just might be the ideal choice.
Learn more about all the 90% and 95% Jumbo finacning options at http://JumboMortgageSource.com or call us 7 days a week at ph: 800-962-0677
We serve buyers acorss the US, including Kansas: Wichita, Overland Park, Kansas City, Olathe, Topeka, Lawrence, Shawnee, Manhattan, Lenexa, Salina, Hutchinson, Leavenworth, Leawood, Dodge City, Garden City, Emporia
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