JUMBO LOANS, JUMBO PROFITS GET THE UNTRADITIONAL SKINNY ON FINANCING BIG
by William J. Tessar, CIVIC Financial Services
A jumbo loan, simply put, is a type of mortgage used to finance properties that are too expensive for a conventional conforming loan. It might seem pretty straightforward, but this type of financing is not exactly ideal for real estate investors. So, what does this mean for investors looking to finance luxury homes or properties in highly competitive markets? Surprisingly, it’s nothing to worry about – and here’s why. ONE SIZE DOES NOT FIT ALL While the value of a jumbo loan varies by state (and even by county), it simply exceeds the limits set by the Federal Housing Finance Agency and can’t be purchased, guaranteed, or securitized by Freddie Mac or Fannie Mae – making it much riskier for lenders. With more money involved and no guarantee, the qualification and underwriting requirements are much more rigorous than applying for a conventional loan. To get approved, you can expect requirements that include a 700+ credit score, a very low debt-to-income (DTI) ratio, a hefty down payment, and two years’ employment history. For a primary homeowner, the jumbo loan process can be challenging; but when a jumbo loan is taken out for an investment property, it can be even more daunting. Let’s jump in and break down the concept of a jumbo loan, and how to get the financing you need without all of the hoops.
22 | think realty magazine :: december 2021
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