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Need a Bigger Loan? There’s a Bank for That
Conforming loan limits increased for the first time in more than a decade due to an increase in housing prices and home values nationally and to adjust for inflation.
“The Housing and Economic Recovery Act of 2008 restricted government-sponsored enterprises like Freddie Mac and Fannie Mae from increasing these limits until real estate prices exceeded their pre-crises highs, which were reached around July 2006,” says Tyler Case, mortgage loan officer for Pittsburgh-headquartered PNC Bank.
Prospective buyers who need extra financial help in the form of a jumbo loan also have reasons to be optimistic, says Patrick Lamb, president of Scottsdale, Ari.-based Homeowners Financial Group.
“Fortunately, as the real estate market has recovered, options for jumbo loan financing, including loans that require less than a 20 percent down payment, have significantly expanded,” Lamb says. “Because of the increased liquidity for jumbo loans, it’s become easier for homebuyers to obtain financing for larger homes.”
That’s not to say that obtaining a jumbo mortgage is a piece of cake, however. These loans are not sold to or securitized by government agencies; instead, they’re commonly sold to large banks, institutional investors or other private companies and are either held in portfolios or securitized through private residential mortgage-backed securities transactions. The fixed interest rate on jumbo mortgages may be higher, and you usually need a debt-to-income ratio of no higher than 43 percent, a credit score of 720 or greater, several months’ worth of backup savings, and a more established history of income.
“But there are jumbo lenders out there that can go down to a 680 credit score or 10 percent down on an adjustable rate mortgage, in some cases,” says Andrew Saltman, CEO of Carbon Capital in Ponte Vedra Beach, Fla.
As always, due diligence is essential when seeking financing. Prepare to shop around among different direct lenders, mortgage brokers, and mortgage bankers who also act as brokers; if you want to go jumbo, seek out a knowledgeable lender who works with numerous jumbo lenders/investors.
Experts recommend first getting pre-qualified for a mortgage by working with an experienced mortgage professional who can help you understand the different program options and terms available to you.
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