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Austin Jumbo Mortgage Loans

Do you have questions about a jumbo mortgage? Please feel free to use this helpful resource as you research your non-conventional or jumbo mortgage needs.

What is a Jumbo Mortgage?

Jumbo loans are a type of mortgage that exceeds the size limits of a conforming loan set by the Federal Housing Finance Agency (FHFA).

What is a conforming loan?

Quite simply, the federal government annually sets guidelines for conforming loans. As a result, investors can be assured of the quality of a conforming loan. This is because, these loans are are eligible for government insurance.

What is a non-conforming loan

Non-conforming loans are typically underwritten to individual bank guidelines. They are also usually serviced and held by the bank that originally underwrote the loan. Since there is no set of standardized qualifications across all lenders, these types of loans are riskier for lenders to issue because they are not insured by the government.

Is there a loan size cut-off?

In Texas, $726,200 is the the conforming loan limit. FHFA determines the limit by state and sometimes metropolitan areas (MSA). Be aware, this is not the house price, but the loan amount.

What are the differences between jumbo and conventional?

Typically, jumbo rates are higher than conventional rates. Additionally, jumbo loans typically require higher credit scores and larger down payments than conforming loans.

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Additional Jumbo Mortage FAQs

For many investors, the underwriting qualifications are stiffer for jumbo loans. The reason is this: the bank is stuck with the loan for as long as the borrower has it. The bank needs to be assured of the quality as examiners review their books on a continual basis.

Borrowers who buy higher priced homes are often more ‘complicated’ than conventional borrowers. At a high level, their tax returns are more involved. Many are self-employed, in sales or own (even partially own) various entities. Therefore, careful review of tax returns from all areas of the borrower’s file is needed. Additionally, since the properties are more expensive, there is more exposure to the bank, so the appraisals are carefully reviewed to ensure the collateral is solid.

Lenders require the last two years of tax returns. If you filed a tax extension, they will take the extension and the previous two years to have two full years to review. If you own a company or own/partners in >25% of a company, they will require a full set of business returns. For C Corps, LLCs and LLPs, they will determine the % owned by the K1 filed. The lender is looking for consistent income as that is used to predict the future income.

A lender can’t tell a CPA what to do or not to do. At a 50,000 foot view, the rule is this: whatever you tell the government you earn is what you are telling the bank you earn. Lenders will add back certain items to help income (e.g. depreciation, mileage expenses), but generally, if your AGI is $100,000 on your taxes, that is what the bank uses.

Generally, the lender will require two appraisals to verify the value of the property. Rates are also a tad higher for loans over $1mm. Thirdly, debt-to-income ratios are typically lower and credit scores need to be higher. Finally, the amount of required reserves increases.

In a nutshell, funds in your various financial asset accounts. Lenders require a certain # of months to be in the account to ensure the borrower has enough to pay the loan in lean times. Lenders require anywhere from four months to 18 months depending on who the lender is and the loan amount, credit scores, etc. Important note: business account funds cannot be counted unless your CPA is willing to write a letter stating the liquidation of funds in the business account will not affect the business in any negative manner.

No real differences if the borrower is prompt in returning all paperwork when requested. I see most real estate contracts with 30 – 45 day closings.

Most likely, it will be handled as a construction loan (see my other FAQs on construction loans). If the remodeling is on the small scale, you can do a simple renovation loan and finance it all at once.

Need More Information About Jumbo Mortgages in Austin?

If you have a jumbo mortgage question that wasn’t answered here, contact local lender Joel Richardson. He can help you understand jumbo loans and get you through the application process. Call him at (512) 203-8244 or fill out his online contact form.

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