There are many new attractive Jumbo loan programs available to qualified buyers in Albany today. What exactly is considered a “Jumbo” loan will depend on the location of the property. A conforming loan “conforms” to conventional guidelines and in most locations like Albany County, the maximum loan limit for a one unit property is $510,400. Anything beyond that amount is considered a jumbo loan.
These are the two primary loan types based upon loan size. Yet there is a third category which is a subset of a jumbo loan. These loans are referred to as “super jumbo” loans. Lenders who issue conforming loans, as most every one of them does, are able to sell the loan, freeing up cash to make more mortgages. There really isn’t such a market to sell loans in the jumbo category and still fewer in the super-jumbo range.
A standard jumbo loan is typically anything beyond the conforming limit but may also have a maximum limit of $650,000. Most jumbo loans, however, have much higher limits. The term “super jumbo” isn’t really a universal term in the mortgage industry and can be a moving target depending upon the location of the property being financed. Many lenders coin the term super jumbo for any loan above $2 million. Super jumbo loan amounts can be as high as $10 million but can vary based upon the bank or lender.
Most jumbo loans are offered as adjustable rate mortgages. Adjustable rate mortgages, as the name implies, can adjust at predetermined periods, such as every six or twelve months. Most adjustable rate loans today are offered in what is referred to as a “hybrid” mortgage. This program is so-called because it’s sort of a mix between a fixed rate loan and an adjustable rate loan. A 5/1 hybrid is a loan where the initial rate is fixed for five years before turning into a mortgage that can change once per year. There are also 3/1, 7/1 and even 10/1 programs available. Hybrid loans have lower start rates compared to rates for fixed rate programs, thus the attraction.
Jumbo loans carry a greater risk to lenders compared to conforming ones. As you can imagine, super jumbo loans carry even greater risk than a regular jumbo loan amount. This means guidelines for super jumbo loans can be more restrictive compared to other loan programs.
Minimum credit score requirements are higher with super jumbo loans compared to other programs. It’s not uncommon to see a minimum score for a super jumbo loan to begin at 720 or above. However, the down payment amount is the important factor when determining the minimum credit score standards.
Super jumbo loans will also require a down payment greater than a traditional jumbo loan in most cases. The minimum down payment for most traditional jumbo loans is 10% of the sales price. However, there are new programs emerging that permit up to 95% financing for approved buyers. A super jumbo loan might require a down payment of at least 10 or 15%. Again, down payment requirements for super jumbo loans can vary from lender to lender so it is important to speak with your loan officer about your financing options. Down payment funds need to come from sourced accounts that you own. If you plan on getting a financial gift from a relative, you’ll typically still need to have at least 10 percent of your own funds in the transaction.
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Besides amounts needed for your down payment, you’ll also need funds set aside for closing costs along with an amount of cash reserves. Cash reserves are counted as the number of months worth of mortgage payments are in the bank after you close on your new mortgage. This amount would include not just the principal and interest payment but also a monthly installment amount for property taxes and insurance.
Proof of significant liquid and semi-liquid assets will need to be documented. Liquid accounts include a bank account where you can easily access your funds. Semi-liquid funds are those available to you but if you withdraw from the fund you would be subject to a financial penalty of some degree. With traditional conforming loan amounts, the minimum cash reserve requirement is typically three months for most loan programs. With jumbo loans, the minimum cash reserve requirements are at least 6-12 months. However, just like the min credit score requirements, reserve amounts will greatly vary depending on down payment and final loan amount.
Reach out to us today to learn more about all the available Jumbo purchase and refinance options in New York.