What is a jumbo mortgage in Texas? This special type of home loan differs from traditional mortgages and, therefore, has its own criteria that borrowers need to meet to qualify for one. Read the guide below to get a detailed overview of jumbo mortgages in Texas, including what they are, how to get one, and whether they’re the right option for your circumstances.
If you’re looking to obtain a jumbo mortgage in Texas, turn to Champions Mortgage, the premier mortgage broker Houston homebuyers can count on. Our team specializes in all types of home loans, so you can find the ideal one.
Understanding Jumbo Mortgages
As the name implies, a jumbo mortgage is a home loan used for purchasing high-priced houses for well over $700,000. Texas homebuyers can secure a traditional mortgage (a.k.a. a conforming loan) if they borrow less than $726,200. You must apply for a jumbo or non-conforming loan if you exceed this borrowing ceiling.
Remember that the amount you borrow dictates whether you’ll need a jumbo loan rather than the price of the house. Say you’re looking to buy an $800,000 house in Houston and make a down payment of $100,000. Your loan amount would be $700,000, which is within conforming loan limits, whereas a down payment of only $50,000 exceeds Texas’s $726,200 traditional mortgage cap.
What is a jumbo mortgage in Texas? Lenders will typically give out loans for up to $3 million. By doing so, they don’t follow the limits put in place by the Federal Housing Finance Agency. The jumbo mortgage definition Texas homeowners follow won’t always be the same in other states that have higher property values, such as Hawaii.
Characteristics of Texas Jumbo Loans vs. Traditional Mortgages
No matter which type of loan you secure, a major part of homeownership is paying back your loan with interest. The Texas jumbo loan financing details tend to include higher interest rates for borrowers. This is because lenders face more financial risks by providing loans as high as $3 million.
You’ll have a lower interest rate when you get approval for a traditional mortgage and face fewer restrictions during the approval process. Getting a jumbo mortgage can prove more difficult because lenders set stricter requirements.
Requirements for Securing a Jumbo Loan in Texas
Now that you know the answer to “What is a jumbo mortgage in Texas?” let’s review what it takes to secure one. These loans do not conform to the limits set by the Federal Housing Finance Agency. Instead, they allow lenders to set their own criteria for borrowers to meet. The exact qualifications may vary depending on the lender, but buyers can generally expect the following restrictions.
Excellent Credit Score
Lenders use credit scores to monitor borrowers’ ability to repay their debts. A lower credit score doesn’t instill much confidence in a lender since it often means an individual has missed payments on their bills or has accruing debt. Lower credit scores aren’t ideal, but buyers can still secure a traditional mortgage with them.
If you want to purchase a high-end home with a jumbo loan, you’ll need a higher credit score than most. Some lenders approve of these loans if you have a credit score of 660. However, most won’t accept a score below 720.
Lower Debt-to-Income Ratio
To take advantage of Texas jumbo home loan features, you must prove to your lender that you have a minimal debt-to-income ratio. To calculate this figure, you must do the following steps:
- Add together all of your monthly debt payments, such as home and car loans, plus credit card debt.
- Calculate your total monthly income through your salary and investment income.
- Divide your debt payments by your monthly income.
Texas jumbo loan applicants can’t have a debt-to-income ratio higher than 45%. Depending on your income, lenders want to ensure you can manage your new mortgage payments along with your other debts.
Larger Down Payment
Along with “What is a jumbo mortgage in Texas?” one of the most popular questions prospective homeowners ask is, “How much will I need for a down payment?” Special home loan programs accommodate buyers by lowering their required down payment to a minimal percentage of the home price. Jumbo mortgages require a larger down payment of at least 20% of the home’s price.
Including this in the loan criteria shows a lender you are trustworthy and have enough financial assets to your name before buying a high-end home. Giving a larger down payment also benefits you. The more you can pay for the house up front, the less you’ll have to pay in monthly mortgage principal and overall interest amounts.
Additional Home Appraisals
An appraiser will determine the market value of your home before the sale goes through. If you get approval for a jumbo loan, lenders often require you to have a second appraisal.
Jumbo Loans for Investment Properties or Secondary Residences
What is a jumbo mortgage in Texas for your primary residence versus an investment property or vacation home? Most of the conditions listed above relate to purchasing a single-family home for your primary residence. If you wish to use a jumbo loan to buy a multi-dwelling unit or investment property, expect different borrowing requirements.
Multi-family homes have higher loan ceilings to accommodate the higher price of these houses. Consult with your lender if you’re looking to obtain a jumbo mortgage for a second home or investment property. In some cases, lenders set stricter requirements, such as higher down payments for these types of properties, compared to purchasing a single-family home for your primary residence.
Meet With Houston’s Premier Mortgage Broker
What is a jumbo mortgage in Texas? How can I receive mortgage conditional approval? Let the experts at Champions Mortgage answer these questions and more.
We specialize in large loan mortgages in Texas and will take the guesswork out of the lending process. Call (281) 727-2500 or email info@championsmortgageteam.com to get in touch with one of our lending specialists.
