There are a lot of questions, misconceptions, and myths in the mortgage industry.
Especially when it comes to jumbo loans.
For a variety of reasons, these loans are often misunderstood. People think they are hard to secure, require flawless credit, and call for massive downpayments. But this is simply not true. As we discussed in a previous article, jumbo loans will not always need a 700 credit score or a large downpayment, and you may not need two years worth of cash reserves.
In difficult times such as these, it seems myths of jumbo loans are becoming more common. People are jumping to assumptions that are simply not true, but if you slow down, do some research, and even talk with a lending agent, you’ll see that many of the assumptions are simply false. Jumbo loans, even today, are not as hard to acquire as you might think.
To help you understand these loans, as well as the top myths of jumbo loans, here are three of the common myths we are seeing, as well as the truth behind the misconceptions…
Top Three Current Myths About Jumbo Loans
Myth #1: During COVID-19 Crisis, Jumbo Loans are No Longer Available
The most fundamental, basic, and potentially damaging myth of them all is the thought that jumbo loans are no longer available. In these uncertain times, industries are making changes and trying to adjust in a manner that will help them through the crisis. In the mortgage industry, this means reducing overall risk and in many cases lenders are becoming more conservative in their lending practices. When they would usually offer loans that bring higher risk but also higher potential for profit, they are instead choosing to dial back their loan options.
But this does not mean that jumbo loans are no longer available!
To be fair, some of the major lending institutions are temporarily pausing their jumbo loans and similar products. Some household names in banking are choosing to suspend jumbo loans until the crisis passes or implement changes that make jumbo loans harder to acquire. But there are still many institutions offering this form of financing.
So if you need a high-balance loan to purchase a large, luxurious home, financing is still possible.
Fact: Cross Country Mortgage, and Other Lenders, are Still Offering Jumbo Loans
The truth is simple: jumbo loans are still available. If you have decent credit, a strong income or assets, and can verify your ability to make the monthly payments, jumbo loans are just as available as they ever were.
Myth #2: Jumbo Loans Require a 20% Downpayment
Another myth that has become all too common among the lending industry (or rather, about the lending industry), is that all jumbo loans now require a 20% downpayment. But this is simply not true.
Downpayments are an important factor for reducing loan risk, so it’s understandable how this myth may have taken shape. Generally speaking, the higher the downpayment on a loan, the less risk there is to a lender. When someone has a large downpayment, they are statistically less likelihood of a default on a loan, so lenders often push for 10% downpayments or higher. With jumbo loans, which inherently have more risk, it’s not uncommon for lenders to require 20%; this goes for “normal” times (if there are any) as well as times of economic crisis such as the current health scare.
So it seems perfectly reasonable that in times such as these, banks, lenders, and lending agents would require larger downpayments on their jumbo loans. After all, the economy is still uncertain, and while things appear to be moving towards the positive, some lenders are requiring more downpayments before issuing a jumbo loan. Some major institutions are now requiring 20% on jumbo loans, but that does not mean that all lenders are requiring this large percentage from jumbo loans.
Fact: Jumbo Loans are Available with Only 10% Down through Cross Country Mortgage
The truth of the matter is simple and clear: if you meet other conditions and requirements, you can take out a jumbo loan with only 10% down through Cross Country Mortgage.
This allows you to take out a loan with a far lower downpayment than other options. Suppose you are purchasing a $2 million property using a jumbo loan. If you were required to have a 20% downpayment, you would need $400,000 upfront. However, if you use a loan that only requires 10% down, you could secure financing with only $200,000. This is still a large number, but it is far lower than the 20% requirement you would see from other loans.
Myth #3: Jumbo Loans Require a Deposit Relationship
One of the factors involved in some loans is a “deposit relationship.” Essentially, if you are banking with a specific institution, you have a deposit relationship. If you have a checking account with your local bank, you have what amounts to a deposit relationship.
In some cases, banks prefer to make loans to people who are currently and actively conducting business with their institution. This seems perfectly reasonable, as it allows the bank to easily access information while rewarding you for being a loyal customer. This has given rise to the myth of jumbo loans that you must have a deposit relationship to use this financing.
Fact: You Don’t Need a Deposit Relationship
Once again, the myth is false. Even in these rocky times, you do not need a deposit relationship to take out a jumbo loan. There are available financing options for some of the largest home purchases in the country, and you don’t need an established relationship to put them to use.
Find the Right Loan for Your Purchase
If you need a jumbo loan to purchase a world-class home, contact our staff today. Even in these difficult, uncertain times, we are proudly offering high quality loans that help you make an excellent purchase.
We encourage you to learn more about jumbo loans and the reality behind these useful financing options!