Fannie Mae and Freddie Mac recently raised the maximum conforming loan limit for the first time in many years. The increase was from $417,000 to $424,100 and took effect on January 1st, 2017. These loan limits apply to most the country except the designated "high cost" locations in Florida, California, Virginia, Colorado, etc. Some of these locations have conforming loan limits over $636,000. Each year, Fannie Mae compares the average home value nationwide in the third quarter with the average home value in the third quarter from the previous year.
A jumbo mortgage is any amount above the conforming loan limit. In Houston Texas for example, the conforming loan limit is $424,100 a jumbo loan is an amount above that figure. When mortgage companies evaluate a jumbo loan application the approval process is much the same as when processing a conforming, or government FHA loan request. Lenders review income, credit, and assets as the primary factors to issue an approval.
Income is verified by reviewing the most recent paycheck stubs covering a 30 day period. The income used for qualifying purposes is the gross monthly income, not the amount after withholdings are deducted. In addition to the paycheck stubs, the lender will request W2 forms from the previous two years. In addition to qualifying income jumbo loans require at least a two-year history of employment which is then supported by the W2 forms. Lenders and banks want to see a similar annual amount from one year to the next and will also compare year to date earnings that appear on the paycheck stubs with the amounts showing on the W2 forms.
For borrowers that are self-employed or receive income from sources other than an employer, jumbo mortgages require a review of the past two years federal income tax returns. Like above, this income should be consistent from one year to the next. The income will be added together and then divided by 24 (months) in order to arrive at a qualifying figure.
Of course, credit is the primary factor with a jumbo loan approval. When a lender receives a jumbo loan application there are three separate credit reports ordered, Experian, Equifax and TransUnion. Due to minor differences in reporting dates by various merchants and businesses to these three repositories the credit scores that accompany these reports will be similar but rarely exactly the same. The credit scores range from 300 to 850 and of the three reported scores the lender will use the middle score for evaluation purposes. The minimum credit score for most jumbo loan programs is 700 when financing the max 95% loan to value. Lower credit scores down to 660 can be accepted if the down payment is 10% or more.
Lenders must also verify sufficient funds to close on a transaction. If a borrower is making a 5% down payment the lender will review recent bank statements showing there are enough funds for the down payment in addition to the amount needed to pay for associated closing costs at settlement. Mortgage companies also want to see additional funds left over after subtracting the amount for a down payment and closing costs. These funds are called “reserves.” A particular bank may request four months of reserves, which means there should be at least four months of mortgage payments in a liquid or non-liquid account. The payments must include not just the principal and interest amount but for property taxes and insurance as well.
In addition, bank statements will be reviewed as a way of validating income. If someone gets paid on the 15th of every month there should be an amount equal to the stated income amount that appears on the initial loan application. Funds that appear on a bank statement that cannot be accounted for may not be used for qualifying purposes.
Home buyers that questions about any of the 90% & 95% Jumbo financing options can contact Jumbo Mortgage Source at http://jumbomortgagesource.com