When buying a Houston luxury home, understanding your mortgage options will help you make a wise purchase. To help you, we’re sharing some tips from Money magazine, along with our own insights!
If you need to finance more than $417,000.00 on a Harris County home, you will be looking at a “non-conforming” loan, also known as a jumbo mortgage. Non-conforming means that the loan exceeds the maximum amount that Fannie Mae and Freddie Mac will purchase and/or guarantee.
Fannie and Freddie do not issue mortgages directly to consumers. Instead, they are part of the “secondary mortgage market.” These government-sponsored entities purchase and guarantee mortgages from banks and mortgage companies. This gives front-line lenders access to liquidity, enabling them to keep making new mortgages.
Jumbo loans are not a part of this cycle. They usually stay on the books of the originating lender.
What constitutes a “conforming loan” varies by state and county. In expensive real estate markets where high home prices are the norm, such as Hawaii, conforming loan limits are higher. For Harris County, the conforming loan limit is currently $417,000.00.
Naturally, the underwriting guidelines for a jumbo loan are a bit different from a conventional mortgage. Here are some examples of jumbo mortgage requirements:
- Jumbo loans generally need a down payment of at least 20%.
- Credit score thresholds for jumbo loans are lofty, usually requiring a FICO of 760.
- Lenders like to see six months of cash reserves for jumbo borrowers.
- Jumbo mortgage interest rates are typically a bit higher than conventional loans, though not by a wide margin.
- Jumbo loans are rarely a fixed-rate product. They are typically adjustable-rate mortgages, such as a 5/1 ARM. Jumbo mortgages can be refinanced into another jumbo loan, or, if paid down to meet conforming limits, into a conventional mortgage.
In recent years, major banks have embraced jumbo mortgages, and have sought to increase their market share by targeting high net worth borrowers. This has made the jumbo mortgage market competitive, giving luxury home buyers more lenders and options to choose from. The type of ARM product, the down payment requirement, and the origination fees and lending costs can vary from one lender to another. You might obtain the best offer from your current bank, but it’s a good idea to shop around!
Need referral to jumbo mortgage lenders, or information about Houston luxury homes? Let us help you! Contact us today for your luxury real estate consultation.
KW Energy Corridor Team
11757 Katy Fairway | Suite 930
Houston, TX 77079