Increase Your Purchase Power With Jumbo Financing Options

Crystal Acohido

Home Loan Originator
NMLS 316238
Compass Home Loans
MLOC # 1194719

What a difference 10 years can make! Just a short decade ago, the mortgage banking industry was reeling in the midst of its most serious crisis since the Great Depression. During this time, the availability of market capital for any financing options outside of government-backed mortgage programs (i.e. Fannie Mae, Freddie Mac, VA, FHA or USDA) was limited. Because jumbo loan programs fall outside the government-backed umbrella, these options were sparse and restrictive. Technically, the definition of a jumbo loan is a loan amount that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These limits differ in many states and counties. Honolulu has the highest conforming loan limit in the country, currently at $721,050. Loan amounts that exceed $721,050 in Honolulu County are considered jumbo loans.

Fast forward to present day and the jumbo mortgage landscape is vastly different. This is a welcome relief for buyers in an expensive real estate market such as Hawaii, or for those seeking to purchase higher ticket homes. Whereas in 2008 when lenders often required a minimum downpayment of 25% or more for a jumbo loan; today it is possible to have as little as 10% downpayment for loan amounts up to $3 million without mortgage insurance. In addition, we are starting to see the return of other creative options in the jumbo sector such as an interest-only payment feature. The interest-only option can be very attractive for financially sophisticated borrowers who want to maximize control of their cash flow and have the assets in reserves to pay down principal balances when needed.

Although some people may be concerned that the trend with expanding credit guidelines may again put the banking industry at risk, rest assured that these new flexibilities are balanced with high thresholds of excellent credit and ample reserve requirements. For example, a borrower seeking to use 10% downpayment for a loan amount of $3 million would be required to document 30 months of payments in reserves, have a minimum fico of 740, and a moderate debt-to-income ceiling. With 20% downpayment, a borrower would need 6 months of payment in reserves. In comparison, in a regular conventional loan purchase, a buyer might only need 0-2 months of payments in reserves. Although jumbo loan programs will not be relevant to the mass segment of the market, they are still important to facilitate activity in a healthy real estate environment and we welcome the changes that have provided buyers with additional options.

Compass Home Loans is a local mortgage banker with a wide variety of mortgage programs, ranging from jumbo financing to first-time buyer programs. Our professionals are trained to customize the best loan options to meet your individual needs. Contact us for a free, no-obligation consultation. Or visit our web-page at www.compasshawaii.com for more information.

Compass Home Loans, LLC is licensed as a Hawaii Mortgage Loan Originator Company and a sponsored third party originator authorized to originate FHA and VA loans. NMLS# 1194719 (www.nmlsconsumeraccess.org). Compass Home Loans, LLC is regulated by the Hawaii Division of Financial Institutions, and offers many loan products. Contact a Compass Home Loans Representative to learn more. This is not a commitment to lend. 2016 Compass Home Loans, LLC. All Rights Reserved.