Financing a luxury home in and around Knoxville, TN means obtaining a jumbo loan. For any mortgage loan above the current conforming loan limit of $484,350, lenders refer to these larger amounts as a jumbo. Note: some locations in Tenessee around Nashville, etc have a slighter higher Conforming Loan Limit. Getting approved for a jumbo loan is very much the same as getting approved for most any mortgage type as lenders evaluate a borrower’s credit history, the ability to repay the debt, employment and sufficient funds to close on the transaction.
Most jumbo loan programs require a minimum 20 percent down payment although there are some programs that ask for less, only 5% down payment in some cases. In Knoxville and the surrounding areas in Knox County, the jumbo market is very little of available homes for sale although the trend for higher-end developments is definitely on the upswing.
Jumbo loans for the Knoxville area can be found at most mortgage companies and loan officers are available to explain the approval process over the phone as well as get an itemization of potential closing costs involved. Have questions? Please contact us 7 days a week.
When buyers consider how much they want to put down on a purchase a visit with their financial planner is probably in order. As funds are taken from a liquid account and used as equity in a purchase transaction those funds are essentially locked into the property. Real estate can be sold and capital recovered but tapping into that equity later means obtaining a home equity line of credit. That said, many who finance a jumbo purchase decide it’s best to keep as much cash in their savings and retirement accounts as possible and leverage the purchase as much as possible.
Qualified buyers who wish to make a 10% or 5% down payment instead of the full 20 percent down do have options. There are plenty of jumbo loan programs up to $3,000,000 that require only a 10 percent down payment. Such loan programs may have slightly higher rates compared to a loan with a 20 percent down payment, so the tradeoff should be carefully considered. A jumbo loan with 10 percent down can also require a separate mortgage insurance policy in some cases, creating a higher monthly payment.
Mortgage insurance (PMI) is, in fact, a true insurance policy that covers the difference between a 10 and 20 percent down payment. For example, a couple decides to buy a home listed for sale at $700,000. A 10 percent down payment is then $70,000 and a 20 percent down payment is $140,000. With a mortgage insurance policy, should the couple go into default, the lender is reimbursed for the difference in down payments. Most mortgage loans of any type require mortgage insurance in some form if the mortgage is greater than 80 percent of the value of the home. With just 10 percent down and the mortgage is 90 percent of the sales price, mortgage insurance will likely be required.
That is unless the borrowers take out two mortgages to avoid PMI. For those who want to put down just 10% or even 5% down. Take the 95% options, this transaction also involves two mortgages, one at 80 percent of the value and a second mortgage at 15 percent. Lenders refer to this scenario as an 80-15-5, where 80 represents the loan to value of the first mortgage, 15 the second and the 5 is the amount of down payment. The loan options available to you will depend on many factors like the final loan amount, credit, etc. But for those borrowers who wish to hold onto as much cash as possible when financing a jumbo home in Knox County, the 80-15-5 just might be the ideal choice.
Buyers can read all the purchase and refinance qualifying criteria on the Jumbo Loan page.