Yes, it is possible to obtain a jumbo loan with just 10% down payment. However, there are certain requirements that borrowers must meet in order to qualify for such loans.
What is a Jumbo Loan?
First, let's define what a jumbo loan is. A jumbo loan is a type of mortgage that exceeds the limits set by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that buy mortgages from lenders. These limits vary depending on the location of the property but typically range from $510,400 to $765,600 in 2020.
LTV Ratio and Credit Score Requirements
To qualify for a jumbo loan with 10% down, borrowers will usually need to have a credit score of 700 or higher, which is considered good or excellent. Additionally, they will need to have a low debt-to-income (DTI) ratio, which measures how much of their monthly income goes toward debt payments.
The loan-to-value (LTV) ratio, which measures the amount of the loan compared to the value of the property, will also be a crucial factor. Typically, lenders will want to see a maximum LTV ratio of 90%, meaning that the borrower's down payment will need to be at least 10% of the home's appraised value.
Reserves and Income Verification
Borrowers will also need to have sufficient reserves, which are funds set aside for emergencies or unexpected expenses. Usually, lenders will require borrowers to have enough reserves to cover at least six months' worth of mortgage payments.
Income verification is another critical requirement. Borrowers will need to provide proof of their income, such as tax returns and pay stubs, to show that they have the financial means to repay the loan.
Mortgage Insurance and Closing Costs
With a jumbo loan, borrowers may also have to pay for mortgage insurance, which is an additional cost that protects the lender in case the borrower defaults on the loan. Mortgage insurance can add thousands of dollars to the cost of the loan, so borrowers should consider this when deciding whether to go with a jumbo loan.
Closing costs will also be a factor. These are fees charged by lenders and other third parties for processing the loan and closing the sale. Closing costs can range from 2% to 5% of the loan amount, so borrowers should be prepared to pay these costs upfront.
Advantages of Jumbo Loans
Despite the higher requirements, jumbo loans offer several advantages, including:
If you are interested in obtaining a jumbo loan with just 10% down, consider working with Mortgage Brokers Pro . Our experienced loan officers can help you navigate the application process and find the best loan options for your needs.
At Mortgage Brokers Pro , we offer competitive rates, flexible repayment terms, and exceptional customer service. Contact us today to learn more about our jumbo loan options and start the application process.