Best known for low rates and increasingly flexible guidelines, conventional loans are one of the most popular mortgages in the contemporary market. If you are looking to buy a high-end house that is luxurious and grand, getting a conventional jumbo loan is your best choice.
What is a conventional loan?
Even though conventional loans are quite common, the availability of different loan types in the market can often make it a bit complicated to understand. So, what exactly is a conventional loan? A conventional loan is a type of mortgage that is not insured or guaranteed by any government institution. These loans are handled by private lenders and are not backed for government entities like FHA, VA, or USDA.
What is a conventional jumbo loan?
Maryland has divided its conventional loans into two different types, conforming and non-conforming loans. A conventional conforming loan is one that meets the loan standards that has been set by Fannie Mae and Freddie Mac, agencies that standardize mortgage in the US real-estate market. A conventional non-conforming or jumbo loan are home loans that exceed the lending limits set by Fannie Mae and Freddie Mac. The conventional jumbo loans are how you buy expensive and luxurious properties in Maryland. The general conforming and FHA loan limit in the states of Maryland is below $679,650. If you want to buy a house that priced above this set limit, a conventional jumbo loan is what you will need.
Learn more about conventional jumbo loans and its advantages.
What are the benefits of getting a conventional jumbo loan in Maryland?
Before we move forward to discuss the conventional jumbo loan requirements in Maryland, let’s talk all the benefits of getting a conventional jumbo loan.
- The conventional jumbo loan allows you to buy multiple properties without limiting your options. Whether you are looking to buy a secondary residence or a boarding house, the conventional jumbo loan gets various mortgage options for you.
- Most government-backed loans need you to pay an additional cost of insurance premium every month. This can substantially elevate your interest rate and cause financial problems. A conventional jumbo loan saves you from the trouble. You do not need to pay any monthly insurance premium and are saved from the elevated interest rate.
- Conventional jumbo loans do not require any pre-payment penalty. It simply means if you want to sell your home and repay the money, or just pay off your loan early, you are saved from penalties that most loans ask for.
- Conventional jumbo loan gives you a choice to decide your own interest rate. You can avail a fixed rate or go for adjustable rate term; the decision is yours.
Want to avail these benefits as soon as possible? Get yourself pre-approved today!
What are the conventional jumbo loan requirements in Maryland?
Here are the conventional jumbo loan requirements that you will need to fulfill to get approved in Maryland:
Down Payment– As conventional jumbo loans offer financial help for larger and pricier properties, the down payment is quite low compared to others. You only need to pay a down payment of 10 percent of the total property cost. This is extremely helpful for individuals living in higher cost states of Maryland. Most banking institutions and lenders ask for 20 percent down payment which can a lot if the total cost of the house in high. The 90 percent jumbo mortgage is the perfect way to tackle the problem. You can also avail a 95 percent jumbo mortgage where the borrower only needs to put up a down payment of 5 percent. It is generally applicable to borrowers looking to buy home with a price tag of around $1,500,000.
Loan to value guidelines– The conventional jumbo loan financing rates are different for different scenarios. Based on the loan to value ratio, one can get anywhere from 85%, 90 %, to 95 % financing on their primary residence. You can avail 85 % financing for a house priced up to $3,500,000, 90% financing up to $3,000,000, and 95% financing for total cost up to $1,400,000.
If you are looking to get your second house financed, the numbers change a little. You can avail 80% financing up to $2,000,000, 85% financing up to $1,500,000, and 90% financing up to $2,000,000.
Credit score– The credit score requirement is considerably high, mainly because conventional jumbo loans deal with larger and costlier homes. If you want 85% financing on your loan, you will be required to have a good credit score of 720 or more. Other financing rates including 90% and 95% require a credit score of 700 or more to be accepted. There are no changes in the credit score requirement despite the fact whether it is your primary residence or a secondary one.
Payment reserve– Based on the total amount of loan taken and the amount paid as the down payment, the borrower will need to have a minimum payment reserve to get approved. If the loan amount is above 1.5 million, you will need to have a 12 months payment reserve. All loans below the amount will require a 6 months payment reserve to get approved.
Income requirements– You will need to submit all income related documents for the past two years. This might include your payment stubs, tax returns, offer letter, and more. Since these loans are not backed by any government institutions, lenders do their own research to choose the most reliable and financially stable individuals. You need to be working for the same employer for the past two to three years. If your employment history is volatile and filled with regularly changing employers, you might not get approved. Make sure to keep your income history clean and stable to get approved.
Looking for ways to finally own your dream house? Get financed with the conventional jumbo loan and avail the plethora of benefits. Make sure you consult with a licensed loan expert to learn more about your options.
Know more and get your loan application approved now!