AL and FL Mortgage News



Depending on what county you are financing in Florida or Alabama if you want to borrow more than $424,100 to purchase, renovate, refinance, take cash-out or build the type of mortgage you are likely* inquiring about is often called a “jumbo loan” or in some cases “high balance” because you are borrowing more than your Conventional county loan limit allows.  Click here to verify your county limit if you are unsure for your area or you can see the general limits for 2-4 unit dwellings on the main page click here.  

If you think you need a jumbo loan it is important that you understand that even if you easily qualify for a jumbo loan with an 820 credit score, high income/low debt and plenty of assets having this designation has very different restrictions that few lenders ever mention and very few consumers understand.  The information herein omits discussion of how to qualify for jumbo loans over a general discussion of what the jumbo market is offering for single unit residential properties.  This information is subject to change and most likely will at any time.

Credit Score and Loan-to-Value (LTV)
While several exceptions exist, most jumbo lenders offer the greatest flexibility/rates/pricing/costs for loans with a 760 or greater score and most all if not all stop lending below a 660 score.  Inside of this big range you can typically borrow up to 90% on a primary purchase or rate/term refi with as little as a 680 score or 80% between 679-660 including cash out refinances.  Second home LTVs are capped at 80% with as little as a 680 score while investment jumbo loans are capped at 70% at 680.  Many lenders set a benchmark of either 720 or 700 for jumbo loans and adjust heavily to the rates/pricing/costs and will decrease flexibility for anything below this range.
Two notable exceptions to this are VA and non-QM loans.  On VA loans you can typically borrow up to 100% of the VA max guarantee allowable with just a 660 score.  Non-QM jumbo loans are loans that fall outside of traditional jumbo requirements where LTVs typically start at a peak of 80% with a 660 score and the LTV is reduced accordingly.  It is possible to borrow to jumbo money with scores down into the middle 500s with a Non-QM loan.

Maximum Loan Amounts
For jumbo loans most lenders have a benchmark up to 90% up to $1 million but have higher score and asset requirements and/or tighter LTV requirements above this dollar mark.  It is common that many jumbo lenders and banks will cap jumbo loan amounts up to $2.5 million but that does not mean finding a loan higher than this amount is difficult.  There a quite a few nationwide lenders who specialize loans above $2.5 million but again the requirements and limitations described here are typically a bit more strict.

Debt Ratios
With the VA as the exception which can allow up to a 60% back end debt-to-income ratio at times (which is extremely high by comparison), most traditional jumbo loans have a limit as high as 43% depending on the scenario.  It is most common that on any jumbo loan above an 80% LTV that this ratio is reduced to 38% and even sometimes to 36%. Exceptions are sometimes made if the borrower has double or triple the asset requirements, higher credit score, or possibly other compensating factors.

It is noteworthy to mention that stated income loans, Jumbo or otherwise, for the most part no longer exist due to various regulations passed regarding ATR which is the requirement of the lender to verify a borrower has the “Ability to Repay”.  This is regulation that is good for our industry.  On the flip side some non-QM lenders have 12 to 24 month bank statement programs as an alternative.  On VA loans some IRRL loans are more basically loan modifications that do not require re-verification of income.  Also for non-jumbo conventional loans there are reduced income documentation requirements for non-self employed borrowers.

Asset Requirements
Over and above cash required to close, jumbo underwriters typically want to a see few to several months of  “reserves” remaining in the bank after closing.  Reserves are calculated in months of equivalent proposed PITIA (principal, interest, taxes, insurance, and HOA fees) payment on the subject property.  In many cases this is as low as 3 months and can be as high as 9 months for primary residences and investment properties.  It is important to note that for second homes the range can be anywhere from 6 to 12 months. 

Property Specific Limitations
  • Acreage - Many jumbo lenders will restrict land size up to 10 acres and stop at 20 acres but options for jumbo mortgages on land of this size do exist.  With most jumbo loans restrictions on land-to-house value are common above 10 acres (i.e. a lender might state that land value can’t exceed 35% for an 15 acre property).
  • Condos - Warrantable condos types R&S in AL, type S only in FL.  If you are unsure if a condo is warrantable, you can read more about this here or you should speak to a loan officer about what a full project review for warrantability entails.  The Florida condo market has similar restrictions for even non jumbo.
  • Miscellaneous Property Types - As a rule one unit properties typically have the least restrictions with Jumbo loans, followed closely by two unit properties. It is important to mention that 3 and 4 unit properties do have significant reductions to LTV, increased score and asset requirements which is too much information to list here.  Condotels, Log-homes, co-ops, mixed-use, and unique properties are typically ineligible for jumbo and conventional financing alike.

Appraisals
Some lenders can and do require two appraisals on loans typically above $1.5 million.  Appraisal waivers common on conventional loans do not apply to Jumbo loans.  On LTVs less than 50% in some instances lenders will use the tax assessed value in place of an appraisal but this is strictly on a case by case basis and occurs mostly at the local lender level.

Terms
Loan Terms offered are typically 30 or 15 Year Fixed Rate and 5/1, 7/1, and 10/1 Libor ARMS.  While it is not a practice we advertise or endorse in any way, it is very common for lenders to offer very attractive ARM rates and incentives for jumbo loans.  ARMs are typically less risky for lenders but riskier for borrowers.

Jumbo Construction and Renovation Loans
Construction-to-Permanent and Renovation Loans for Conventional, FHA, VA and jumbo-sized VA loans do exist and are readily available now.  Unfortunately, this is not the case for Jumbo loans but there are alternatives.  Unless you use your own cash or have significant equity in the property in its as in condition that you can take cash-out from to cover renovations, you will likely be getting what resembles a standard construction product with a 6-12 month term that you will have to refinance out of.  This product is the same for new construction.  With sufficient assets and higher credit scores (above 700 or 720) you can typically borrow up to 90% on traditional construction products for jumbo loans and refinance out into a regular end loan after the project is finished.

If you want to get pre-approved or discuss how to qualify for a Jumbo mortgage you can call us at 888-269-8835 or apply online 24 hours a day.

*It is important to note that if you are borrowing more than your county limit, there are ways to avoid having to go with a jumbo product if needed. 

Disclaimer
Posted by Devin Murray on October 3rd, 2017 12:48 PM

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