When lenders evaluate a mortgage application, they primarily review three risk factors- credit, income and the ability to repay the debt and assets available to close on a transaction. As it relates to credit, lenders rely mostly on credit scores. Credit scores are a reflection of payment history, available credit and other factors. These three digit numbers are provided by the three main credit repositories of Equifax, Experian and Transunion. Lenders throw out the highest and lowest of the three reported scores and use the middle when evaluating credit.
Mortgage companies are also required to demonstrate an “ability to repay” a debt and use a combination of income and minimum monthly credit obligations to arrive at debt-to-income ratios. When figuring in the mortgage payment, lenders and banks use the principal and interest payment on the mortgage as well as a monthly allotment for property taxes and insurance. This amount is added to other minimum monthly credit obligations such as credit card debt, installment loans and student loans. If there is any evidence of monthly spousal or child support payments lasting more than two years, those too are calculated to conclude the ability to repay monthly credit obligations.
Yet the last piece of the puzzle is equity, or the amount of down payment an applicant brings to the table. Most jumbo loan programs, those with loan amounts greater than the prevailing conforming limit of $424,100 here in the Dallas-Fort Worth area, ask for at least a 20 percent down payment. On a $750,000 home, that amounts to $150,000. Closing costs are also an element of any jumbo loan and a lender needs to verify there are enough available funds to pay for these costs as well. Finally, jumbo loans can require a minimum amount of funds known as reserves. Reserves are tallied on a monthly level and are the amounts due for the principal and interest, taxes and insurance payment. If a jumbo loan program asks for six months of reserves and the total mortgage payment is $5,000, the lender will verify sufficient funds of at least $30,000 in addition to funds needed for a down payment and closing costs.
Out of all the mortgage programs available in the Dallas-Fort Worth area, including those underwritten to Fannie Mae and Freddie Mac guidelines as well as FHA, VA and USDA loans, jumbo loans account for about one out of every five mortgages placed. Yet unlike Fannie Mae or FHA requirements, there are no universal jumbo guidelines that must be followed. Instead, jumbo lenders establish their own set of guidelines when evaluating a jumbo mortgage application. Other lenders may also approve jumbo loan applications based upon a jumbo lender’s guidelines and then sell that loan to others. Doing so replenishes a lender’s line of credit to be used to approve still more jumbo mortgages.
There is a jumbo loan financing options available in the greater Dallas, Texas area that do NOT require 20 percent down but asks for only 5 percent for a down payment. Considering that same $750,000 sales price, the down payment would just be $37,500, not $150,000. The minimum guidelines for this unique mortgage program are really not much different than any other.
The minimum credit score for this loan is 700, the maximum loan amount is $1.5 million and the property must be a primary residence and not an investment property. Three months reserves are required and the 95% jumbo loan can be either a combination of a first and second mortgage or a single jumbo loan with no mortgage insurance required. Mortgage rates can be slightly higher than for a jumbo mortgage with 10% + down payment. However, for buyers who do not wish to put down 20 percent and want to purchase now, this program just might be the answer. Contact Jumbo Mortgage Source by calling tel: 800-962-0677 to learn more about all the 95% Jumbo purchase and refinance options. You can also visit http://JumboMortgageSource.com
Texas Veterans should also learn about high balance VA loans. Read the complete VA Jumbo Loan Guide to learn more.
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