Truth About Jumbo Loans | Valor Lending Group
Looking for a high-end luxury home?
Are you interested in learning the truth about Jumbo Loans?
The truth about Jumbo Loans is that they are not “Commercial Loans”, jumbo loans require income verification. Depending on if you are self-employed or employed will determine your qualifying income. Also, Jumbo Loans are not “Government Loans”. Jumbo loans are sold in the secondary mortgage market the same as traditional conforming loans. They are NOT backed, insured or guaranteed by any government agency such as FHA and USDA loans, except for the VA jumbo loan, which are offered up to $1.5 million loan amount by a few select funding sources.
A Jumbo Loan is a conventional home loan that surpasses the conforming lending limits of Freddie Mac and Fannie Mae.
These limits vary by county, for most counties in the Bay Area the 2021 conforming loan limit amount is $822,375, any loans that exceed this amount is considered a Jumbo Loan.
Jumbo loans at up to 95% LTV on purchases.*
*California Properties Only
What you will learn:
- What a Jumbo Loan is
- How to qualify for a Jumbo Loan
- Why to use a Jumbo Loan
- What a Jumbo Loan looks like
- Self-employed requirements
- Employed requirements
- Qualifying hourly employee income
- Qualifying salary employee income
- Income, debts and credits
- Down payment, rates and costs
- Owner Occupied vs. Non Owner Occupied
- Owner Occupied
- Non Owner Occupied
- Jumbo Bank Statement Loans
- Jumbo Loans 2-4 Units
- Who a Jumbo Loan is right for
- VA Jumbo Loans
- Jumbo Loan Highlights
- Who a Jumbo Loan is right for
- The Pros and Cons of a Jumbo Loan
- The Bottom Line
- Recap on Our Loan Products
- Additional Programs we Offer
Truth About Jumbo Loans | Valor Lending Group
What is a Jumbo Loan?
A Jumbo Loan is one that exceeds the county guidelines for conforming and high balance conforming loan limits set by Fannie Mae and Freddie Mac. (Check you county limits here)
Valor Lending Group has a number of full document financing solutions for purchase, refinance, and cash out Jumbo Loans, we have options that allow you to secure and maintain the luxury property of your dreams.
Why Use Jumbo Loans?
Traditional mortgage lenders require tax returns, W-2s, and paycheck stubs in order to determine monthly income. For salaried and hourly borrowers, the lenders look at gross income for qualifying purposes. But for self-employed borrowers, traditional mortgage lenders look at net income, the adjusted gross income showing on tax returns. The qualifying income is viewed in conjunction with all debts, and a debt-to-income (“DTI”) ratio is calculated. Traditional mortgage lenders would be required to have a DTI of no more that 35%, however, at Valor Lending Group our funding sources typically allow up to 50% DTI and a lower credit score and down payment requirement.
How Do You Qualify For A Jumbo Loan?
You qualify for a Jumbo Loan in the same way as a conventional or high balance loan, with full documentation, such as 2 years tax returns, W2s, most recent pay stubs, etc.
What Does a Jumbo Loan Look Like?
1) Self-Employed Requirement Jumbo lenders will typically require a borrower to be self-employed for a minimum of two years. This is verified either through appropriate professional licenses, business licenses, or sometimes a letter from a tax preparer. Additionally, 2 years of business income tax returns are required for business owners to verify no decline of business income year over year. Jumbo lenders may also consider the W2 earnings of a spouse or co-borrower in terms of qualifying income.
2) Employment Requirement
Once again, jumbo lenders review 2 years of consecutive tax returns, W2’s, 1099’s, and pay stubs to determine qualifying income. Additional types of income include social security, pensions, retirement monthly distributions, and annuities, etc. Jumbo lenders will look to obtain your most recent 30 days paystubs and a certified employment offer letter stating the gross salary, start date and benefits (for those who are starting a new job in the same industry).
(a) Qualifying Hourly employee income
For hourly W2 employees, the lender will use your hourly rate of pay, averaged with your most recent 2 years tax return income. Additionally, the lender will qualify a two year average of your commission, bonus, vacation pay and sick pay etc. (if applicable).
(b) Qualifying Salary employee income
The lender will always count 100% of your current salary and does not use a two-year average as your pay is guaranteed year to year per your employment contract. To the contrary the lender will qualify a two-year average of your commission, bonus, vacation pay and sick pay etc. (if applicable).
3) Income, Debts & Credit
After determining total qualifying income, the next step is to total up all debts, including the new mortgage payment, property tax, insurance and homeowner’s association (HOA). All monthly debts are viewed in conjunction with total monthly qualifying income, and most lenders will allow up to 35% debt-to-income (“DTI”) ratio when qualifying borrowers for a Jumbo loan. However, Valor Lending Group has funding sources that will allow up to 50% DTI on a jumbo loan. Most jumbo lenders require a minimum 700 credit score, although each has its own guidelines. Credit requirements for jumbo loans are more stringent than the traditional lenders.
4) Down Payment, Rates & Costs
The minimum down payment on a jumbo loan is usually 20%. A handful will allow as low as 10%, although 10% down is becoming increasingly rare. These loans will have a noticeably higher interest rates due to a higher default risk factor, and lack of investors buying 10% down jumbo mortgage-backed securities on the secondary market.
Additionally, the 10% down jumbos will require higher credit scores and liquid reserves (12 Months) and a lower debt to income ratio (DTI). Larger down payments, say the 20% or higher, do often allow for a better rate and term. Gift funds from close relatives are usually allowed, to be applied towards the down payment. Although, many jumbo lenders may not allow gift funds for liquid reserves. Rates for jumbo loans are generally higher than traditional conforming loans (based on increased perceived risk to jumbo lenders), but all other typical loans fees are similar, such as origination points, broker and lender fees, appraisals, title and escrow, etc.
5) Owner Occupied vs. Non-Owner Occupied
(a) Owner Occupied
Owner occupied jumbo loans, including second homes, offer higher leverage up to 90% loan to value (LTV) as well as lower interest rates, and lower credit score requirement. This loan can be vested in your personal name or family revocable trust.
(b) Non-Owner Occupied
Non-owner-occupied jumbo loans will require a minimum of 20% down, higher interest rate and higher credit score requirements. This loan can be vested in your personal name or family trust, and in addition can be vested in a LLC or corporation etc.
6) Jumbo Bank Statement Loans
It is also possible to get a “jumbo bank statement loan.” These are simply bank statement loans above a certain dollar amount, which is higher or lower depending on the county. For example, California Jumbo Loans start above minimum loan amounts ranging from $548,250 (Riverside County), to $822,375 (Los Angeles County) for single unit properties. (These amounts are higher for 2, 3, and 4-Unit properties). Depending on the jumbo loan lender, bank statement loans can go up to $10 million or more.
7) Jumbo Loans 2-4 Units
Jumbo loans can be used for 1–4-unit residential properties. Jumbo loans for 2-4 units allow for higher loan limits depending on the number of units. For instance, in 2021, San Diego County will allow loan amounts for 2 units up to $964,300, 3 units up to $1,165,600 and 4 units up to $1,448,600. As you increase the number of units; you will see a decrease in the loan to value. The highest loan to value is offered on a 1-unit property (SFR, Condo or Townhome).
VA Jumbo Loans
VA Loans offer financing up to 100% of a property’s value, and feature both fixed and adjustable rate loans. And there is NO down payment up to $1,500,000.00!
Valor Lending Group has VA Jumbo Loans for veterans, active-duty members, and their families. The qualifications for VA Jumbo Loans are different from a typical VA loan.
To qualify for VA jumbo loans, you need to have a FICO score of a 640 or higher.
- With a FICO score of 640 you will be required to come with 10% down (with loans that exceed 1.5M).
- With a FICO score of 680 you will be required to come with 5% down (with loans that exceed 1.5M).
- And if you do not want to come with a down payment you will have to have a FICO score of a 740 or higher.
*This information and requirements may vary depending on lender policies
Valor Jumbo Loan Programs | Top Jumbo Loans Highlights:
- Up to 95% LTV
- Max Loan Up to $30MM!! (Most lenders cap at $2M-$3M)
- Flexible Guidelines
- 15, 20, 25 & 30 Year Fixed Interest Rates
- Valor boasts the very best communication, service, rates and performance in the industry
- Valor ensures the very best pricing by shopping with many direct lenders so you don’t have to!
Who Is A Jumbo Loan Right For?
At Valor Lending Group, we have Jumbo Loans perfect for the high income and strong asset borrower who is looking to buy or refinance a luxury home in high end markets.
In addition, we also offer full documentation low rate loans, stated income loans, and hard money loans.
Advantages and Disadvantages of Jumbo Loans
1) Pros of Jumbo Loans
- Higher Loan Amounts
- Luxury Homes purchase (better schools, lower crime rates, larger homes)
- No Mortgage Insurance (for some lenders)
2) Cons of Bank Statement Loans
- Higher Interest Rates
- Lower Leverage
- Lower debt to income ratio, typically at 35% DTI
- Higher reserve requirements
- More stringent underwriting guidelines
The Bottom Line
Jumbo loans provide borrowers with the opportunity to acquire much higher value, larger homes in the most desirable communities throughout the country.
In addition, borrowers will not have to come in with the difference in cash above the conforming loan limits. When seeking these higher-end luxury homes. Not every lender offers jumbo loans, it is best to identify and partner with a jumbo loan specialist such as Valor Lending Group.
We also offer:
- Bank Statement Loans
- Hard Money Loans
- FHA Loans
- Doctor/Dentist/Vet Loans
CALL or EMAIL ME for immediate attention to your scenario!
Valor Lending Group can fund your fast-hard money loan up to $10mm in as little as 7 days often without an appraisal.
Please do not hesitate to call on me for any scenarios.
Recap of our Loan Products:
- Hard Money Loans (20% down / minimal documentation) Typically Fund in 7-10 days.
- Stated Income Loans (Great for business owners and self employed ) No tax returns!
- 100% financing is available (we can cross collateralize other properties if there is enough equity)
- Valor VA Home Loan 100% financing up to $1.5MM
- Rental Property Loan – No tax returns or DTI calculation! Based on subject property cash flow – No DSCR Coverage needed!
- Flipper & Rehab Loans (Flip a property with one of our many options)
- 2nd Position Loans up to $5mm
- Raw Land & Lot Loans
- Ground up Construction for spec homes, custom homes and commercial ground up.
- Farms, Vineyards, Ranches and Agricultural Properties (25-30% down)
- 5% down Jumbo’s with NO MI up to $2mm / 10% down up to $3mm
- Manufactured Housing / Mobile Homes (20% down / 600+ credit score)
- Acreage Properties
- Commercial Loans up to $500mm
- 3% & 5% down Conventional Loans– LPMI (Lender paid mortgage insurance)
- Foreign Nationals Loans (no social security or residency required)
We also offer:
- Conventional Conforming Loans (under $510,400)
- High Balance Conforming (from $510,400-$765,600)
- Jumbo Loan Financing to $10 Million / Super low rates! / 10% down Jumbo to $3mm
- FHA, USDA
- Reverse mortgages up to $1 Million Value
- Cash Out Refinancing
CONTACT ME TODAY for immediate attention to your scenario!
**Rates and terms subject to change without notice**
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