The real estate market in Phoenix, AZ, and the surrounding area is incredibly lively. This city is a beautiful spot to land for homeowners from all walks of life in the unique southwest region of the United States. If you can endure the hotter summers, then you can enjoy the warmth and sunshine for the majority of the year.
Home affordability is often a big question for prospective buyers. In a market where there are plenty of luxury homes and properties that are on the expensive side, a conventional home loan may not be enough to cover the cost of your home purchase. The median price for a home in Phoenix is about $440,000 in 2023, which means there are plenty of homes that may be too expensive for most mortgage programs.
This does not mean that you cannot secure a home loan for a more expensive property in Phoenix. There are products called jumbo loans that still make it possible to finance a home purchase that is on the more expensive side of the spectrum. Here is how buying a home with a jumbo mortgage works.
First, What is a Jumbo Loan?
Conventional loans are backed by two real estate entities known as Fannie Mae and Freddie Mac. But these organizations will only insure mortgages up to a certain limit. In 2023, that limit is around $726,200 for most markets. Any loan amount above that number is considered a non-conforming conventional loan, making it riskier for lenders to give out. Another name for these products is jumbo loans.
Buyers that require a jumbo loan are looking to buy more expensive properties, either because they are luxury homes or because the market is a very high-value location.
Standards for Qualification
Since Phoenix jumbo loans are riskier because of the potential losses lenders could face from default, they have higher standards for approving borrowers. Some of these standards include:
- Credit Score Minimum: Jumbo loan lenders will likely require a credit score of at least 700 for approval compared to a score of 620 being acceptable for most conventional home loans.
- Low Debt-to-Income Ratio: DTI is a measure of your monthly debt and income. A lower DTI like 36% should be enough to show lenders that you have the resources needed to cover payments.
- Greater Capital Assets: To cover a 20% down payment and ease the concerns of the lender, jumbo loan borrowers will need significant cash assets upfront. This will make the down payment easier and will also support your application when lenders look into your finances.
If you can meet these requirements, along with several others, you have a better chance of being approved for a jumbo mortgage in Phoenix.
Thorough Property Appraisals
A lot of money is involved when a jumbo mortgage is required to buy your home. You are approaching seven digits so far more scrutiny is going to be present throughout the loan approval and homebuying process.
Before a jumbo lender approves your loan, they are going to want to conduct a property appraisal. This is the case for every type of home loan, but jumbo mortgages may result in a second appraisal being conducted. Lenders want to ensure that the amount you are applying for matches the actual value of the property. Additionally, these appraisals tend to be more detailed and strict than those for lower-value loans.
Never Waive the Inspection
Buying a home with a jumbo mortgage means you are making a big investment. No matter the structure of your loan agreement, it is going to be expensive. An inspection is a crucial step in the real estate transaction process, and you should never agree to waive it as a buyer.
Inspections reveal necessary repairs and potential problem areas for the home you want to buy. This can help with the negotiation process for the price. It will also inform you about whether or not the home is worth the asking price. You should never overlook certain features when buying a home, especially windows, and foundational issues.
Work with an Experienced Realtor and Lender
One of the most important steps you can take when using a jumbo loan to buy your Phoenix home is to work with experienced professionals. This means a competent, veteran realtor as well as a high-quality lender.
You can always look for reviews on Google for the various real estate entities that you will work with. The last thing you want is to encounter major hiccups with your jumbo loan because the lender you chose is inexperienced or unreliable. Spend time researching the best real estate agents and lenders in Phoenix, AZ so that your large purchase goes smoothly and you can move into your dream home.
