The luxury home purchase process is different from buying a conventional or tract home. There’s more money passing hands, so naturally the risk escalates.
The process is slower as well, so if you plan on purchasing a luxury home, and you won’t be paying cash, you’ll most likely need to obtain a jumbo loan.
What is considered a luxury home?
You might be surprised to know that it isn’t merely the price that defines the luxury home. While the concept can best be defined by perception, here are some additional characteristics of luxury homes:
- Desirable location
- Distinctive architecture
Since everything concerning real estate depends on location, a basic defining point of a luxury property is “a home that goes above and beyond what’s typical for the market,” according to Devon Thornsby, real estate editor at U.S. News.
What typically doesn’t differ in the luxury home market is the financing of the home
If you’ll be pursuing a jumbo loan to purchase your luxury home, you’ll need to start the loan process well in advance of shopping for homes.
What’s a jumbo loan?
A jumbo loan, also known as a non-conforming loan, is what you’ll need to purchase a property that is priced higher than Fannie Mae’s and Freddie Mac’s conforming loan limits. For 10 years, the conforming loan limit has stood at $417,000 for a single-family home.
That changed last year, when markets heated up and prices began to soar. The limit is now $424,100 for most regions across the country (it is higher in certain high-cost counties, such as some in California).
Find your county’s loan limit at Bankrate.com. Click on your state and you’ll be taken to a list of counties and their corresponding conforming loan limit.
Qualifying for a jumbo loan
Jumbo loan requirements are more stringent than those of the conventional loan and they vary by lender.
You will usually need a higher credit score (typically 700 or higher). Generally, a 10 percent down payment is required, although borrowers with high credit scores can find mortgages with a 5 percent down payment requirement.
The good news is that, in their pursuit of wealthy clients, some lenders are willing to waive the private mortgage insurance (PMI) requirement on these low-down payment loans.
Like all loans, however, you’ll need to prove that you can make the monthly payment
This means proving:
- A stable employment history – at least two years with your current employer or two years of tax returns to prove self-employment.
- An explanation of what you do for a living if its “value” isn’t as obvious as, for example, a physician or CEO.
- Proof of your income – Lenders want to see not only pay stubs, but bank statements as well (even the blank pages, believe it or not).
- Proof of your down payment funds.
In a nutshell, you will need to be able to document your assets, show a high credit score (the average score for the jumbo loan in the first quarter of 2017 was 771) and show proof of a responsible credit history.
Jumbo loan expenses
As of the first quarter of 2017, jumbo loans were actually cheaper (by 21 basis points) in the long run than conforming loans, according to a report released by Core Logic.
In August of this year, for instance, interest rates on these loans tumbled to where they were “13 basis points lower than the conforming rate, the largest spread between the two since March 2016,” according to CNBC’s Diana Olick.
Be prepared for closing, however
Because there are additional steps in the qualifying process, jumbo loans tend to carry higher closing costs. An example of an extra step is a lender who may require two appraisals of the property.
It may even out in the end, however, with the aforementioned sweetening of the pot to attract wealthy clients.
Not only are some lenders waiving the PMI requirement for low-down payment jumbos, but also accepting borrowers with low credit scores.
If you’re interested in pursuing a jumbo loan, contact us and we will put you in touch with local lenders who can answer all your questionsIf you want to learn more about the amazing communities and homes in Westchester connect with us for a confidential and informative conversation or tour.
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Jennifer epitomizes Platinum Drive Realty’s motto “I grew up here. I live here. I sell homes here” and she is known for providing each of her clients with an exceptional experience guided by her expert local knowledge. She works tirelessly to ensure each of her clients has a professional, enjoyable and successful Westchester community & home buying search or selling experience. She often remains very friendly with her clients and welcomes the opportunity to be an ongoing resource as they settle into Westchester Living. Every step she takes will embody her core principals; integrity can never be compromised, clients’ interests always come first and character, commitment, and passion truly matter. For her buyer clients, Jennifer looks forward to the opportunity of being “Your NYC to Westchester” guide and real estate broker. For her seller clients, Jennifer is proficient at implementing an aggressive marketing strategy in order to obtain the best price possible in a highly efficient and seamless manner.
Jennifer thoroughly enjoys assisting buyer clients in navigating the landscape of the Westchester residential real estate market. She is skilled at enabling clients to define where they see opportunity & facilitating the process from initial search through closing. Jennifer was awarded the Platinum Drive Star Award for Outstanding Performance in Sales & Client Services in 2014 & Platinum Drive Realty’s Superstar Award for Excellence in Sales and Client Services 2015 & 2016 for her outstanding performance in sales and client service.
In addition to her passion for local real estate, Jennifer has a firsthand understanding of home renovation and new construction. Upon moving from NYC to Scarsdale, she and her husband performed an extensive renovation on their first home. After completion, they moved onto their second project in Larchmont, a full house renovation and expansion. More recently she is active with local developers who specialize in new home construction, home expansions and renovations. Jennifer has the ability to understand a home’s full potential and can help clients find or create their dream home.
Jennifer is the Manager of Platinum Drive Realty’s Larchmont Office. Jennifer was raised in Scarsdale. After graduating from Scarsdale High School, Jennifer received a BA in Child Study & Sociology from Tufts University and an MA in Language & Literacy from New York University. Jennifer currently lives in Larchmont with her husband, Michael, and their three sons, Braden, Devon & Zane. She specializes in communities in Southern Westchester with a concentrated focus on the Sound Shore Communities of Larchmont, Mamaroneck, Rye Neck, Rye, New Rochelle as well as her hometown of Scarsdale. Prior to real estate, Jennifer was a teacher in the Mamaroneck Public Schools. Jennifer has a deep understanding of the local school systems and the needs of young families.
Professional Associations & Accreditations
Jennifer is a Licensed Associate Real Estate Broker & has her Accredited Buyer Representative designation (ABR) and her Seller Representative Specialist designation (SRS). Jennifer is a member of the Hudson Gateway Association of Realtors & the National Association of Realtors.
Jennifer’s Website: westchesterliving.hou
Jennifer Facebook Page: facebook.
Jennifer’s Instagram: instagram.com/westchesterlvng