What Is a Super Jumbo Mortgage?

Almost everybody has to take out a home loan in order to be able to afford making a home purchase. However, the amount of the loan differs greatly from person to person. Standard home loans will only cover up to $417,000. Buyers who are planning on purchasing a house more expensive than that will need to take out a jumbo mortgage, which covers homes between $417,000 and $625,000.

Any property costing over $625,000 will require a super jumbo loan – although some lenders consider anything over a $1 million to be a super jumbo mortgage. Super jumbo loans are non-conforming loans, which means that they do not have the standard amount of government regulation.

Super Jumbo Mortgage Requirements

Because of how much money super jumbo loans consist of, lenders consider them a much bigger risk. Because of this, they’ll have stricter requirements in order to qualify for a super jumbo mortgage. The following are some of the requirements that you may need to meet:

  • You must make a bigger down payment – Lenders may ask for a bigger down payment. Whereas normal loans require down payments of anywhere between 5 and 20 percent, lenders may ask for as much as 50 percent.
  • You must get multiple appraisals – Most lenders will require at least two appraisals.
  • You must have excellent credit history – No lender will provide you with a super jumbo mortgage unless they are absolutely certain that you are financially responsible. This means that your credit score must be excellent. A score of 750 or higher is deemed to be an excellent credit score. Additionally, there cannot be any late payments on your credit history for a period of two to three years.
  • You must have a low debt load – Lenders will check your debt-to-income ratio to ensure that you don’t have outstanding debts that will prevent you from being able to make your mortgage payments.

Super Jumbo Loan Terms

The following are some of the terms you can expect from a super jumbo mortgage:

  • High interest rates– Lenders will generally charge you at least one or two percent more in interest than the standard interest rate for a regular jumbo mortgage. Your interest rate could be even higher depending on how large the loan is and on the loan-to-value ratio.
  • Adjustable rate mortgage – Most super jumbo loans are adjustable rate mortgages. They allow for lower interest rates and more flexible payment amounts. There are some risks with ARMs though. A regular ARM can result in interest rates and payments rising after the first year, while 5/1 and 7/1 ARMs provide some time to keep payments down and to sell the property.

If you plan on purchasing a home that costs over $1 million, or in some cases over $625,000, then you will need to qualify for a super jumbo loan. Keep in mind the requirements and terms to determine whether you will qualify. For more information about mortgages in general, be sure to contact Alex Echeandia today.

 

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