Everyone has their own dream home. Your preferences may not be the same as the others. Some prefer a simple house with just the right number of rooms to accommodate their family and lifestyle. However, there are others who prefer luxurious homes due to their size, appeal and value.
If you’re one who loves to have the bigger and better things in life, then you’ll most likely prefer a luxurious home. Deciding on buying an expensive house is easy. The question is, can you afford to pay in cash? If not, are you qualified for a mortgage type that will enable you to buy your dream home?
Jumbo Loans are what can help you make your dream home purchase a reality. But what is a Jumbo Loan in Texas? And what are the requirements you need to qualify?
Defining Jumbo Mortgages
Jumbo Loans are the type of home loans that can give the loan amount you need to buy a luxurious house. It is a non-conforming mortgage since it does not conform with the rules set by Fannie Mae and Freddie Mac. These are two Government-Sponsored Enterprises that sets the maximum loan limit and requirements for most traditional mortgages.
Texas Mortgage Loan Limit
Every state has a different limit when it comes to mortgages. For Conventional Loans in Texas, the maximum loan limit is $453,100. Anything higher than that is a Jumbo Mortgage Loan. For more lenders, many are willing to finance your dream home and give you up to $3,000,000.00 mortgage limit.
Jumbo Loan Requirements
Every mortgage lender will have different mortgage loan requirements. Since Jumbo Loans are lot risker thanks to their large credit balance, lenders have stricter standards, and such loans are harder to qualify for. If you plan on applying for a Jumbo Mortgage Loan, it would be best to take note of the following.
Credit Score Not Lower Than 700
In traditional mortgages, you can qualify for a loan even if you have a bad credit score – but not in Jumbo Loans. To qualify, you need to have at least 700 and above FICO score.
Good Read: 7 ways to improve your credit score
Debt-To-Income Ratio Lower Than 43%
Most conforming mortgages will allow 45% Debt-To-Income Ratio. For Jumbo loans, you will need to have 43% or less to get approved. This way, your lender can be confident you can pay your monthly mortgage on top of your other monthly debt payments.
Usual Down Payment of 20%
Before, you’ll need to pay 20% down payment for a jumbo loan. Nowadays, you can avail of this mortgage type for as low as 10-15% down payment.
Asset And Reserve Requirements
Your Asset Reserve is dependent on your PITI payment. This refers to your Principal, Interest, Taxes, and Insurance. A month’s worth of PITI is equal to one-month reserve. For Jumbo Loans, you’ll most likely need at least six months’ worth of asset reserve.
Jumbo Loans may be harder to qualify for and may have higher rates due to the considerable amount of loan you’re borrowing. However, you get to choose between a fixed-rate and adjustable-rate mortgage which can work in your favor. You can always find a reliable mortgage lender that can offer jumbo loans in competitive rates, so shop around and choose wisely.