Jumbo Loans in Las Vegas
What are Jumbo Loans?
Jumbo Loans are types of non-conforming loans that exceed the maximum amount limit for purchasing a home. The government sets a certain amount that you can purchase a home for in whichever area you are in. For example, if you are in Clark County then your maximum loan limit would be $453,100. Now, non-conforming loans are types of loans that do not follow Freddie Mac and Fannie Mae guidelines. Any loan under $453,100 will be conforming loans. A conforming loan is a loan that follows the Freddie Mac and Fannie Mae guidelines. It is possible that the country you are in has a higher limit, so you can check to see what your limit is before purchasing your new home.
Now, these loans will have more qualifications than other loans. Jumbo Loans are more of a “risk” to a lender because Fannie Mae and Freddie Mac do not back your loan. This means that the lender will have no protection. In result, you may have a higher rate than other types of loans. Although, you may buy a home that is over the limit and you do not have to take out two separate loans to do so!
If you have any questions about these loans, contact your Las Vegas mortgage broker today.
How do you qualify for Jumbo Loans?
Jumbo Loans will have more qualifications than your standard Conventional or FHA Loans. These loans are going to have more strict guidelines because of the risk. If considering a Jumbo Loan, the three most important guidelines you will want to have in good standing are your credit, income and assets. Typically with any loan you will want your credit score to be over 740 to take advantage of the better rates and easier requirements. Although, you may qualify with a lower credit score. Now, with your income you want to make sure you have plenty of income to show for down payment and closing costs. Also, you may have to show reserves. Reserves are income that you need to show you have as proof you can afford the payments for a certain amount of months. This will typically align with your assets as well.
Now, along with having your credit, income and assets in line, you want to make sure that you have a low debt-to-income ratio. Your debt-to-income ratio is the amount of money you make over the amount of liabilities you have. For example, if you make $6,000 per month then you cannot pay more than $2,700 a month in expenses. Now, this will include your new mortgage payment. If your new mortgage payment is $1,750, then you cannot go over $950 in miscellaneous expenses. These expenses can include credit cards, car payments, etc. Ideally, you will want to stay under 40% to be on the safe side. Your Las Vegas mortgage broker can help you calculate your debt-to-income ratio if you have any questions.
Also, you are going to have to show bank statements. Typically, you will bring in two month bank statements to show you have the funds to close. If you have any deposits in your account that are 50% more than your income, you are going to have to document them. If it is a cash deposit, it will be more difficult to document. Worst case, the underwriter will just take it out of your available assets. Along with bank statements, you will also have to bring in income documentation. We will need W-2s, last 30 days of pay stubs and 1099s (if applicable). If you own any other properties, we will need the mortgage statements, insurance declaration pages and the HOA coupon (if applicable).
If you have any questions on the requirements for Jumbo Loans, contact your Las Vegas mortgage broker today!
Advantages and disadvantages of Jumbo Loans
Advantages of Jumbo Loans:
Disadvantages of Jumbo Loans:
Now, the biggest advantage of Jumbo Loans is that you do not have to adhere to the guidelines by Fannie Mae and Freddie Mac. You can go over the income limitations that they set in place. If you were to do a conforming loan, you will have to stay under the $453,100. Another advantage, you may have a better rate than a Conventional Loan! Your mortgage broker can give you an update on what the rates look like today, give us a call! Jumbo Loans are a great way to buy a property over the income limits. Although, you do have the option to get two conforming loans but, you will have two different mortgage payments. These loans give you the option to condense and keep one mortgage payment.
Now, every loan will have its disadvantages. The first thing to keep in mind is the higher the loan amount, the higher the payment. You want to make sure that you can afford the payment. That is a great first step to consider when buying any home! You do not want to take on too much debt. Also, due to the “risk” of these loans, there will be more requirements and more documentation to acquire. Due to the fact that they do not abide by Fannie Mae or Freddie Mac.
If you have any questions on these loans, contact your Las Vegas mortgage broker.
Understanding your costs and your payment
Jumbo Loans will have a higher down payment than other loans because of the purchase price. In order to forego the mortgage insurance, you will have to put at least 10% down. You are more than welcome to put 20% to decrease your payment and loan amount. The down payment plus your closing costs will be what you come in with at closing. Now, your closing costs will consist of underwriting fees, fee you cannot shop for, escrow fees, prepaids, initial escrow payments and any miscellaneous fees.
Now, your closing costs will start out with your underwriting fee. The lender you are using will determine what this fee is. This is a base fee that will be a charge to all borrowers. Then, you will have your fees that you cannot shop for. These fees will consist of verification documents such as: appraisals, credit reports, flood certifications, re-inspection fees and verifications of employment. These fees are a set price and usually do not change. Then, we will have escrow fees which are fees you can shop for. These will come from a title/escrow company of you or your agent’s choosing. Typically, your agent or your lender will have a title company that they think is the best option with the best pricing.
Next, we have your prepaids which are costs that you will pay at the time of closing. These will consist of interest, taxes and insurance that are due. For example, if you close in the middle of the month then you will have to pay for those other 15-16 days of interest. For all purchase loans, you will have to pay a full premium which is 12 months. Also, you will have an initial escrow payment which will go into your escrow account. Your escrow account will make sure your premium is paid in full. Same goes for your property taxes, you will pay usually six months of property taxes to make the sure there is enough to pay the necessary expenses. If there are any miscellaneous fees such as: real estate commission, transaction fees, etc you will see those in your closing costs as well.
Now, your monthly payment will consist of your loan amount and rate, hazard insurance, taxes and HOA (if applicable). Your loan amount will be your purchase price minus your down payment. Your interest rate will be determined by your mortgage broker and what the price of the rates are that day. Although, if you do want a better rate you can always buy down. This means you bring in more money at closing to get a better rate. Also, you will have hazard insurance. This payment will be from your insurance provider. To determine your monthly payment, you will divide your annual premium by 12. Same goes for your property taxes, which your county will provide. If you have any Homeowner’s Association fees you would add this as well.
For example, let’s say you buy a home for $550,000 and bring in a 10% down payment. Your loan amount is going to be $495,000. You will have no mortgage insurance payment. Let's say your interest rate is 5.5% and this is a 30-year term loan. Below is a breakdown of what your payment would be:
Please note all numbers given are given as an example for you to better understand the mortgage process. Guidelines and rates are subject to change. If you would like to get an idea of a payment or you would like to submit an application, contact your Las Vegas mortgage broker today!