The smart alternative to a Jumbo mortgage.
Sometimes having two mortgages makes good sense for your clients.
In most of the U.S., the conforming loan limit for single-unit property is $484,350.
Across many parts of the country, however, home prices are significantly higher. And while a larger mortgage amount comes with a higher commission, these jumbo loans also come with a unique set of hurdles.
As a result, many home buyers are finding themselves in a difficult position, with limited options—especially in highly competitive markets. They can either deplete their savings to put more money down, settle for a less desirable home, or pay a higher interest rate.
There are a few reasons why it may make sense to avoid these jumbo headaches.
Larger loans come with tougher credit requirements.
Home buyers seeking Jumbo mortgages may find it harder to qualify. Most lenders will expect borrowers to have:
- Larger down payments – At least 20%.
- Proof of income – Borrows will need to show at least two years of tax returns.
- Very good credit – A score of 740 or above is required for approval.
- Low debt to income ratio – Carrying a lot of debt is a red flag. Ideally, the ratio should be lower than 43%.
- Ample cash reserves – A cash cushion gives lenders confidence that borrowers
can easily weather life’s setbacks.
Larger loans may come with higher rates.
Lenders will publish different rates for conforming loans vs. jumbo loans. And when the jumbo rate is more–your clients will pay that extra amount on the full loan amount.
Larger loans may exclude some lenders.
The fact is, some smaller banks are less keen on non-conforming loans.
Some borrowers may become worried about their ability to get the financing they need. They may even be tempted to back out of a deal. Fortunately, there’s a simple solution.
Make high priced properties more affordable with a piggyback loan.
Don’t let high Jumbo rates and strict guidelines put your deal in jeopardy. A piggyback loan can help your clients sidestep Jumbo mortgage rates and get into the home of their choice.
This strategy splits the mortgage into two separate loans. The first loan, or primary mortgage, is a low-cost conforming loan for up to the maximum amount allowed by Fannie Mae or Freddie Mac. The second mortgage, usually a home equity line of credit, or HELOC, makes up the difference.
A smaller monthly payment delivers big benefits.
Combining a conventional loan with a HELOC can get your clients into a larger house with a smaller monthly payment. But the benefits don’t stop there. Because they can put less money down, they can hold onto more of their cash. Compared to a Jumbo loan, it’s easier to qualify. And expensive PMI (private mortgage insurance) is not an issue.
Let Quorum help you close the deal.
As leader in residential finance, we work hard to structure flexible HELOC solutions that are good for your customers, and good for your business. Our new RealtyLine Plus HELOC features a low, 3.95% introductory rate and affordable, interest-only payments. Your borrowers will benefit from:
- CLTV up to 95%
- Generous terms. As much as $500K
- Realistic credit requirements. 680 FICO score
- Fast approvals—often in the same day.
- Minimal paperwork We use the primary mortgage application.
- Simultaneous closings ensure a seamless process
We also offer a new Interest-Only RealtyLine Plus HELOC that features a low, 3.95% introductory rate and affordable, interest-only payments.
It’s easy to do business with us.
When you partner with Quorum, you’ll enjoy exceptional service and support. A call is all it takes to get started; we don’t require a broker agreement or signup fee.
We know every deal is different—and we’re committed to getting deals done. Our knowledgeable loan officers are always available to answer questions and help you get to closing faster.
Banking That’s Good. For You.™
Quorum Federal Credit Union is a leader in innovative mortgage credit solutions. For more than a decade, our alternative lending products have helped our clients grow their businesses and create win/win situations for borrowers and originators. To learn about how we serve our members visit quorumfcu.org.
© 2019 Quorum Federal Credit Union. Serving members since 1934.