While the definition of luxury homes varies depending on the market, the process for obtaining a jumbo mortgage loan in Illinois — a loan over $453,100 — is similar across the board and more attainable than borrowers might think. In fact, the interest rates for jumbo mortgage loans are at historic lows, currently hovering around 4.5 percent. In the past, homebuyers would often be forced to split the house payment between a conforming loan and an adjustable-rate home equity line of credit or a fixed-rate home equity loan. That happens much less often now due to expanded offerings in the mortgage industry.
Jon Goldman, a senior mortgage consultant at Wintrust Mortgage, says the luxury lending market has continued to get stronger and now offers more lending options.
“Creative products continue to offer luxury buyers more flexibility on their first or second home, whether they’re interested in the expansion of interest-only options or permanent financing,” he says.
Goldman says that buyers are frequently under the impression that they need a near perfect credit score and will have to put down 20 percent up front, but that’s not always the case. Most lenders top out around $2 to $3 million and require a 720-plus credit score for most of their luxury financing options.
“We treat all borrowers the same as far as the information gathering process, but a large portion of luxury loans may require larger reserves, higher credit score requirements, and different requirements for debt to income (DTI) ratios,” Goldman says. “Typically, with loans under $453,100, the buyer can put down as little as 3 percent and have DTI ratios in the high 40s. Most luxury jumbo loans over $650,000 require at least 10 percent down payment with a DTI between 43 percent to 47 percent.” However, clients should be aware that some larger loans require a second review from another underwriter, resulting in additional requirements for closing the loan.
The luxury market tends to have more self-employed borrowers, Goldman says. These homebuyers typically have multiple corporate tax returns and a more complex financial structure, which could make financing more complicated.
Goldman believes that no matter what the client is looking for, maintaining frequent communication throughout the process is one of the most important facets of a successful mortgage transaction. “It is imperative that the agents and buyers are aware of each milestone as it passes,” he says, noting that keeping buyers informed about the timeline and being available to answer questions at every step of the way is crucial to providing the high-quality customer service that befits a luxury property.