In the United States, most real estate purchases rely on mortgages that are secured by the government. The Federal Housing Finance Agency (FHFA) backs mortgages that conform to specific standards. Unfortunately, in Detroit, this doesn’t include mortgages greater than $647,200.
Jumbo mortgages are harder to secure, but they extend up to 2.5 million, and jumbo loan rates aren’t necessarily higher than conventional mortgage interest rates.
In this article, we’ll look at what you need to secure a jumbo mortgage in Detroit, and how much you can borrow.
How Many Times my Salary Can I Borrow for a Jumbo Mortgage in Detroit?
To qualify for a jumbo mortgage, you need to show steady income over at least two years. You can demonstrate this with pay stubs, W2s, 1099s, and tax returns. The exact amount you earn isn’t as important as showing the lender that you will continue to make a similar income in the future.
The amount you can borrow for a jumbo loan is not solely dependent on your yearly income.
Lenders are more concerned with the overall state of your finances. How much money you are eligible to borrow for a jumbo mortgage may depend on a couple of questions:
- What is your credit score?
- What is your DTI (Debt to Income ratio?)
- How much cash do you have in reserve?
- What kind of down payment can you afford?
Even if you have an excellent salary, there is no guarantee you will be approved for the amount you want, especially if you are carrying a lot of debt. Conversely, you don’t need to have a huge salary to afford a jumbo mortgage, especially if you have relatively little debt and some savings.
How Long is a Jumbo Mortgage in Detroit?
Jumbo mortgages, like conventional mortgages, are available with different terms and repayment schedules. You can sign up for fixed or adjustable term loans for 10 years, 15 years, or longer.
The term length of your jumbo mortgage will depend on your finances and your planning.
From a borrower’s perspective, the terms are better on shorter-term mortgages, but a longer-term jumbo mortgage might allow you to access the home you want.
What Happens to a Mortgage When You Sell?
When you sell your home, the buyer pays you the value of the house plus transactional costs, and you use that money to pay off your mortgage.
Whatever you have left over is equity. All of the mortgage payments you have been making have an accrued value that you can claim when you sell the house. Many people use this equity to put a down payment on a new house.
This is a routine process in real estate, with 65% of home buyers selling a home and buying a new one at the same time.
If you aren’t able to pay off your mortgage with the money you make selling your home, due to declining real estate values or other factors, you have negative equity, also referred to as being underwater. If you want to sell your home but you won’t recoup any equity from it, you might need additional funds to pay off your mortgage.
Can I Qualify for a Mortgage in Detroit Without a Job?
Technically, yes – although you will be required to show consistent income going back for at least 2 years and be able to provide some kind of reassurance to the lender that this income will continue.
If you are in-between jobs, a freelancer, or a business owner, you might not be able to provide salary data to prove that you will have income in the future, even though you are personally and professionally sure that you continue to earn consistently.
If you are applying for a jumbo mortgage without a job, you might be required to show more documentation to reassure the lender that you are financially solvent. You will need to provide proof of income going back two or more years, and you might be required to have more cash reserves in addition to the down payment.
How to Apply for a Jumbo Mortgage
The process of applying for a jumbo mortgage is similar to applying for a regular mortgage, except with a few extra requirements.
First, get your documents together – you will need tax documents to prove your income, pay stubs if you have them, records of any debt you hold, and records of any cash reserves you have access to. This will allow you to prequalify with a lender so you can start shopping for a home.
When you find your perfect home, you make an offer. At this point you know exactly how much you need to borrow, so you can apply and be approved for a jumbo mortgage, close the sale, and move into your new home.