Homeowners and Supersized Mortgages

If you’re in the market to purchase a home, would you consider a larger mortgage?

According to the Mortgage Bankers Association (MBA), jumbo loans are on the rise and have been easier to receive. June saw a higher spike than any other month in the past eight years.

The many names it’s called – supersize loans, jumbo loans, nonconforming mortgages – are mortgages with higher debt. These loans are designed to finance luxury properties and homes that exceed the limit set by the Federal Housing Finance Agency, and these values vary by state.

These loans are not guaranteed by Fannie and Freddie, meaning the lender is not protected from losses if a borrower defaults.

Some of the qualifications lenders may require for a jumbo loan are:

  • A FICO score higher than 700 – sometimes as high as 720
  • Hard cap of 45% for a debt-to-income ratio
  • Underwriters may ask for full tax returns, W-2s, and 1099s

Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, states, “Credit availability has generally increased in 2019 as lenders have worked to meet affordability challenges. Because mortgage rates have recently fallen and home price growth has decelerated in many markets, credit availability may stabilize at its current levels.”

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