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A Super Jumbo mortgage is a mortgage loan for a minimum amount of $1,000,000. The loan can be used for a purchase, or as a refinance. Due to the size of the super jumbo loan, it is considered non-conforming and does not have the usual amount of government regulation. Lenders have strict requirements that need to be met before they will approve a loan of this size. If you are financing an amount that falls into the super jumbo category, you will need a large down payment, excellent credit and a long employment history. Depending on your overall profile, the lender will grant you a loan structure that suits their risk tolerance.
Loan To Value
In most cases, the maximum super jumbo loan-to-value ratio is 80 percent of the appraised value. If the lender feels their risk level is too high, they may require a larger down payment on your home purchase. Many lenders require that you invest at least 50% of very large loans so that you are well vested in the property you are purchasing. They will also require more than one appraisal company to establish the value of a property.
You can also use a super jumbo to refinance an existing loan and get cash out of your equity. The loan-to-value can be lower depending on the lender, and there may be a maximum dollar amount that you are able to take out of the equity.
Credit History and Rates
Your credit history must be excellent in order to qualify for a super jumbo mortgage. You are required to have no late payments in the last two to three years with this type of loan. Also, your debt load should remain low in order to qualify for this type of mortgage. A lender will analyze your debt to income ratio and will strictly adhere to any guidelines in place when it comes to disposable income.
Most lenders charge one to two percent more than the standard Jumbo mortgage rate. Depending on your loan amount and the loan-to-value ratio, the interest rate can be higher. If you are dissatisfied with the rate, you can always shop around with other lenders to compare what they have to offer.
Most loans are adjustable rate mortgages, or ARMS because they are more popular due to their lower interest rate and flexible payment amounts. Many borrowers will use an interest-only ARM or a negative amortization loan to keep their payments low while they try to sell the property.
There are risks with an ARM, mainly the adjustment period. A 5/1 or 7/1 ARM carries less risk than a shorter term ARM, since the rate is fixed for a longer period. For example, on a 5/1 ARM the rate is fixed for the first five years and then it converts to a one year adjustable rate. The 5/1 ARM gives the borrower five years to sell the property and keep their payments consistent. While a regular ARM, for example, can start to rise after the first year of the loan’s origination and make a home unaffordable.
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