Even with the Federal Reserve’s December rate hike, interest rates are still historically low. Those low rates, coupled with looser credit qualifications, are helping millennials (people age 35 or younger) qualify for mortgages and even jumbo mortgages.

Jumbo loans, often called “nonconforming” loans, are any mortgage loan that is over the conforming limits set by the Office of the Federal Housing Enterprise Oversight (OFHEO). So they can’t be guaranteed or purchased by Fannie Mae or Freddie Mac. Those conforming limits are $417,000 in most of the country but go up to $625,500 in areas with the highest housing costs. In Florida, Collier and Monroe Counties have higher conforming loan limits ($448,500 and $529,000, respectively, in 2015).

Easing Loan Qualifications

Lenders are beginning to work with borrowers who may not fit into existing borrowing guidelines but are otherwise qualified. For example, jumbo loans are typically only extended to extremely creditworthy borrowers, and usually require higher down payments (generally 20 percent or more). Some lenders, however, may only be requiring down payments of 15 or even ten percent.

Typically, a lower down payment on a jumbo loan means the lender will require a borrower to have more cash reserves. Often, that’s at least six months of the borrower’s monthly housing expenses (principal, interest, taxes, and association fees). A lower down payment allows borrowers to keep more money in the bank to meet the reserve requirement. A ten or 15 percent down payment on a jumbo loan is still a lot of money, but some millennials are turning to their parents for help to make those lower down payments.

Lenders have begun approving jumbo loans for borrowers who may not meet the usual qualifications for income documentation or minimum credit scores but who can compensate in other ways. For example, lenders often require two years of tax returns to document the income of someone who is self-employed. However, some may approve a person who has been self-employed for less time, as long as he or she has a track record in that industry and has adequate funds on reserve.

Lenders have also been more willing to count capital gains from investments as income if borrowers can show a consistent record of cashing in those gains.

Shop Around

Different lenders have different standards for loan qualifications. If you’re looking for a jumbo mortgage in Florida, Embrace Home Loans can help you evaluate your options and find lenders that may be able to accept your individual circumstances. For more information, please browse our website, or call us at 407-733-6425.

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