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David A. Krebs is a licensed mortgage broker with over 15 years of experience offering loan options beyond traditional banks

Home to gorgeous beaches, bustling nightlife and luxurious lifestyles, Miami is a city known for its beautiful skyline and higher than average property prices.

For many people, purchasing property in this great city is an exciting event. However, with the higher property prices, securing property finance is not as straightforward as it is in lower priced areas.

In 2021, if your loan amount is over $548,250 (an increase from the 2020 limit of $510,400), then your loan will be considered a jumbo loan in Miami-Dade County.  This means that different requirements and rules will apply.

(Please note that the limits may vary from year to year.  For the most recent conforming loan limits, visit the Federal Housing Finance Agency’s website here.)

If you want your own jumbo loan in the Magic City (or other major metropolitan areas in Florida), then this guide to jumbo loans is for you.

What are jumbo loans?

A jumbo loan is a loan that is beyond the size limits of Fannie Mae and Freddie Mac backing.  In 2020, this generally applies to loans over $510,400 in Miami-Dade County.

Jumbo loans are also called non-conforming loans, because they do not conform to the requirements set by the Office of Federal Housing Enterprise Oversight, which means that these loans are not protected from losses if you default on your loan.

There are additional key differences to be aware of.

First, interest rates will most likely be higher on a jumbo loan than a conforming loan. Lenders increase interest rates to compensate for the  increased risk involved due to not being backed by the government banks.

Second, jumbo loans usually require higher down payments.  This is not true for all cases but you should expect your down payment to be in the vicinity of 20%.  However, some providers offer favorable terms such as 10% or 15%.

Note that these differences vary between lenders, so it makes sense to shop around. If you would like help finding a favorable jumbo loan, contact me.

How big are jumbo loans?

The loan limit for jumbo loans are different by county.

As these limits represent the amount considered to be the average loan price in an area, jumbo loans may start at lower amounts in counties outside of Miami.

If you are purchasing property in one of the main areas of Miami such as Brickell or Edgewater/Midtown, you will likely be needing a jumbo loan.

How do these loans work?

The process for writing a jumbo loan is similar to any mortgage.  You borrow an amount of money for the purpose of purchasing a property, and make routine payments based on how much you owe in principal, your interest rate and the term of the loan until the loan value is cleared.

How much you can borrow depends on your independent circumstances such as your credit score, character, collateral, conditions and loan amount.

How do you qualify for a jumbo loan?

Getting approved for a jumbo loan is not necessarily harder than getting approved for a conforming loan.  Given the private nature of lenders and the risk involved, there are no set requirements for a jumbo loan.

However, when considering a loan application, lenders will review the following five core factors:

  • Condition
  • Capital
  • Character
  • Collateral
  • Capacity

Condition refers to the reason you are borrowing. What is the purpose of the loan and how does that fit with the lender’s intended exposure?

Capital is concerned with your contribution to the purchase. Borrowers who are contributing a large amount of their own capital to a transaction will be considered more favorably than those who are looking for 100% financing.

Character refers to the character of the individual. For instance, can you demonstrate a high level of responsibility and personal integrity regarding financial transactions?

Collateral is the factor which considers which items, if any, will be used as collateral for the loan should you default. These items can include other properties and vehicles.

Finally, lenders will consider your capacity when evaluating your loan application. You will be asked to provide tax returns, bank statements and other documents. Lenders will also consider how many mortgage payments you will already be able to cover from cash reserves, and whether you are already too highly leveraged.

What are typical jumbo loan rates in Miami?

Interest rates on jumbo loans are set by lenders and investors and can vary greatly.  The rates can trend up or down based on how the market is performing and the availability of credit.

Therefore, if you are looking to finance a large property transaction, then it makes sense to shop around to make sure you have surveyed the most effective lenders with respect to coverage, interest rates and closing costs.

How can I help?

As seen above, with the highly variable nature of jumbo loans it makes sense to review as many lending programs as possible in order to secure the best deal for your particular circumstances. However, not all loan programs are actually advertised.

As a mortgage broker, I have access to dozens of these different lenders and financial institutions which accept all collateral types and client backgrounds including domestic and foreign national borrowers.

This means I can work with clients who have great credit, such as those with 780 scores and above, as well as borrowers with developing credit scores such as 500.

For all my clients, I also provide coaching on how best to position your particular application to improve your chances of being approved by a lender. For example, some borrowers may find that extra documentary evidence of a certain type can drastically improve their chances of being approved.

When your mortgage lender cannot do a jumbo home loan for you, don’t give up. Contact me at (321) 239-2781 or email me here for help with your jumbo loan.

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