While you may not think of your borrowing needs as “jumbo,” nearly half of all Westchester towns currently have a median list price that exceeds “standard” mortgage lending requirements. And for NYC commuters, the numbers aren’t much different for favorable spots on Long Island and in New Jersey and Connecticut.
Jumbo mortgages come into play when borrowing needs on a single-family home exceed $625,500 in the majority of New York City suburbs—some, however, define “jumbo” as single-family homes with costs above $417,000. While this may be the threshold for an “expensive” property in many parts of the country, here more and more homebuyers are falling in to the jumbo mortgage bucket than ever before.
So what’s the difference? Enough to require some additional planning in the weeks and months leading up to your prequalification application. For starters, only a few banks and lenders will approve jumbo mortgages with 10% down. Late last year,—others will likely follow, but it’s good to aim for 15-20% down on jumbo mortgages to avoid any potential pitfalls. With 10% down, buyers can expect demands for a lower-than-average debt-to-income ratio, higher credit scores and higher reserves (AKA emergency funds) than ever before.
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If increasing your down payment isn’t an option, an alternative approach to securing the appropriate financing is to obtain two mortgages, typically from the same lender. This “combination” or “piggyback” loan is a bit more complex than traditional lending processes and involves one loan that conforms to the 80% limit. The second loan would cover the remaining amount, usually 10% and be added to a 10% down payment to cover the total cost. The rate for the second mortgage will likely be higher than the first and, of course, requires added approvals and a second payment each month.
A mortgage broker can help you navigate these options, as can lending experts at institutions like Bank of America and Wells Fargo, which account for the majority of jumbo mortgages in this area. With some added planning and careful attention to ratios, credit history and available assets, securing a jumbo mortgage is no more difficult than a traditional mortgage—nearly 85% of jumbo mortgage applicants were approved in 2013.