Is A Jumbo Loan Right For You?
Demand is strong for home sellers in the greater Chicago area, and competition is fierce for homebuyers. Part of presenting home sellers with an attractive home-purchase offer in a strong housing market rests on the mortgage lender a homebuyer selects. Ideally, the mortgage lender acts as a consultative partner who presents a variety of loan options at competitive rates and terms, and offers customized solutions and flexibility that big banks can’t always provide. Equally important is the lender’s ability to provide a seamless approval process and an on-time closing.
Likewise, strong real estate markets might also present the need for loan products that extend beyond the limitations and borrower criteria that conventional loans require, like jumbo loans. Here’s a bit more detail about what this type of non-conforming loan entails, what transactions it’s intended to support, and whether it may be a fit for your home-lending needs.
Is a Jumbo Loan Right for You?
If you’re considering making an offer on a single-unit home in Chicago priced at $600,000 or more (and you don’t want to put more than a 20 percent down payment toward the purchase), you may need a jumbo loan. Because conforming loan programs backed by Fannie Mae and Freddie Mac stipulate loan limits of $417,000 for a single-unit home, condo or townhome in the greater Chicago area, jumbo loans are an important loan product for home buyers shopping in real estate price ranges.
How do I qualify?
Because jumbo loans entail financing of hundreds of thousands of dollars, borrowing criteria tends to be more stringent than with conventional loan products. Before applying for a jumbo loan, ensure you meet what is typically considered the minimum borrower criteria:
- All borrowers noted on the loan must have a very strong credit history free of negative events like a bankruptcy or foreclosure within the last seven to 10 years
- To qualify for the most competitive jumbo loan rates, all borrowers noted on the loan may need to have a strong credit score, typically defined as 740 or higher
- Documented proof of stable and consistent employment and earnings
- Assets that will be held in reserve after closing (and after the down payment is made). This might include a combination of savings, investments, traditional, ROTH and self-employed retirement plans, and/or fully vested balances in a workplace sponsored 401(k) or 403(b) plan
- Funds for down payment: Borrowers may be required to put forth a down payment of at least 20 percent of the purchase price of the home
What Other Benefits Does This Loan Offer?
Despite the income or cash on hand that borrowers purchasing higher priced real estate may have, loan interest rates remain near historic lows — and real estate is a highly illiquid investment. Borrowers who don’t want to lose significant liquidity by investing large amounts of cash into their home purchase may be well-served by these larger non-conforming loans specifically designed to provide homebuyers with the flexible and cost-effective financing options they need.