Should I Get A Jumbo Loan To Buy Property In Troy, MI?

If you’re thinking of a way to finance your dream home, then getting a jumbo loan in Troy, MI might be a brilliant idea.

This type of loan is typically available for up to $2 to $3 million. Plus, jumbo loan requirements are more relaxed than in the past.

If you want to buy a house that exceeds the limits for a conventional conforming loan and consider taking out a jumbo loan, here’s what you need to know.

What Is a Jumbo Loan?

A jumbo loan is a type of mortgage used to finance homes that exceed the limits for a conventional conforming loan. This year's maximum amount for a conforming loan is $647,200 for most of the country, as determined by the Federal Housing Finance Agency (FHFA). Home buyers who want to purchase an expensive property may need a jumbo loan to finance their house.

What’s the Difference Between Jumbo Loans & Other Mortgages?

Because jumbo loans exceed the conforming loan limit determined by the FHFA, they are called non-conforming loans by the mortgage industry.

The non-conforming title matters to home buyers. Because they’re classified as non-conforming loans, they’re not eligible to be guaranteed, purchased, or secured by Fannie Mae and Freddie Mac.

Since this type of mortgage isn’t under Fannie Mae and Freddie Mac’s jurisdiction, lenders can set their requirements. Which means guidelines for each lender may vary.

Before you apply for a loan, use our jumbo loan calculator for Michigan to estimate your monthly mortgage payments.

Jumbo Loan Requirements

Debt-to-income Ratio

Your DTI must be low when you apply for a jumbo loan because it tells lenders that you have a steady cash flow to cover the monthly mortgage payments. If you make a larger down payment or credit score, you might be able to qualify for a jumbo mortgage with a higher debt-to-income ratio. 

Some jumbo loans won’t let you qualify if your DTI ratio exceeds 45%.

Credit Score

Lenders may require your credit score to be higher than 700 and, in some cases, as high as 720 to be eligible for a jumbo loan.

Documentation 

To show lenders that you’re financially responsible, you’ll need extensive documentation, and they usually require more than conforming loans. Be prepared to submit your 2-3 years’ returns, 2-3 years’ W-2 or 1099 statements, bank statements, and information on any investment accounts.

Cash Reserves

Your chances of getting approved for a jumbo mortgage will be higher if you have ample cash in your bank account. It’s common for lenders to ask their clients to show they have enough cash reserves to cover a year of loan payments. 

Benefits of Jumbo Loans 

Jumbo loans have tons of benefits if you choose this mortgage to finance your property. The advantages are listed below:

Higher Loan Limits

The first obvious advantage of jumbo mortgages is their higher loan limits. You can use a jumbo loan to purchase a large house in areas where the housing market reflects higher average home prices. For individuals who can’t put down a considerable sum of cash, a jumbo mortgage is necessary to get their dream home.

Competitive Interest Rates 

Even though jumbo mortgages are larger-value loans, the rates offered by lenders can be lower than conventional mortgages. Keep in mind that even a slight rate change can help you save hundreds, if not thousands, in the long run.

Flexible Loan Terms 

Jumbo loans allow you to choose from various loan programs. You could take out a jumbo mortgage with a 30-year fixed rate or even an adjustable rate, giving you more flexibility in your mortgage terms.

Lower Down Payment

Conventional lenders prefer when borrowers make a 20% down payment on a property. If they don’t, they’ll usually make the home buyer get a private mortgage insurance policy, which protects the lender if you stop making payments on your mortgage. Fortunately, for individuals who want to take out a jumbo loan, you often can make a 10 % down payment or even a 5% down payment on the home instead.

The Bottom Line

If you plan on purchasing a property in a high-price market in Michigan, you’ll need to take out a jumbo mortgage. The good news is jumbo loans are becoming more accessible online and are easier to qualify for now.

If you’re ready to take the next step toward your dream house, contact a mortgage broker from Reliance Financial Group to help you get started.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.