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Jumbo Loans

Jumbo Loan Qualifications: What do I need?

In 2003, Fortune Magazine coined the acronym HENRY (high earner, not rich yet). It describes the segment of the population having significant potential for future wealth. If you are considering a jumbo loan, there is a good chance you may be a HENRY.

High earners are typically defined by an annual income range of $250-500,000. The distinction from “rich” being, income is earned through working rather than assets and investments. Professionals such as lawyers, doctors and dentists are a great example of this segment. They have the discretionary income to afford mortgages above the conforming loan limit and the low DTI required to qualify for a jumbo loan.

I Have the Income. What Else is Needed?

Some jumbo loan requirements taken into consideration are the borrower’s credit score, cash reserves, employment status, debt-to-income ratio, and down payment.

With non-conforming loans, lenders are more likely to examine jumbo loan qualifications at a deeper level than they would a conventional mortgage. But that does not mean you have to ace the “what I need to qualify” checklist in order to consider a jumbo loan. You should work closely with a lender so they can tailor a loan program to best suit your situation.

Few Jumbo Loan Qualification Obstacles are Insurmountable

If you fall into the HENRY category, there is a possibility the required 6-12 months of reserves are not yet sitting in your bank account. A lender can take a look at how a lower DTI or higher down payment will qualify you for your jumbo loan.

Similarly, you may not have the lengthiest or strongest credit history. A trusted lender can often find a program with a higher interest rate for which you may qualify. Again, the size of the down payment will be factored in as well. A higher down payment usually grants some forgiveness for a lower credit score.

Another consideration is gifted money. Let’s say you recently finished your residency, and your parents sent you a very nice check in celebration. Your lender is the perfect person to help you decide how that money can be put toward a home. For example, a portion of gifted funds can be used to meet the reserve requirement. In some situations, this will be more helpful than allocating the gifted money for a down payment.

What Might My Situation Look Like?

The best starting place when considering a jumbo loan is to figure out how much you can afford. Then speak with a mortgage expert to find your best options.