Bank Buster Wholesale Jumbo Roars Onto Market
Mortgage Brokers Celebrate a New Wholesale Jumbo Mortgage Loan available in December, 2018.
This new wholesale jumbo mortgage loan was designed to compete directly with big bank interest rates, except with the speed and underwriting flexibility you get from an independent mortgage broker.
Wholesale Jumbo Mortgage Loan Guidelines
Wholesale Jumbo Mortgage Loan Limits:
- Minimum Loan Amount: $726,525
- Maximum Loan Amount: $1,500,000
Downpayment / Equity Requirements:
- 20% Down Payment allowed for all programs
- 20/10/10 Allowed – Use Piggyback second and 10% down.
- 80% Equity for Refinance / Cash Out Refinance
Eligibility Requirements Quick Look
- 30 Year Fixed Rate Term
- Can only use for Primary Residence or Second Home
- Investment properties are not allowed
- Single Family or Owner Occupied Duplex Allowed Properties
- Maximum Debt to Income of 43% DTI
- Loan must be run through Fannie Mae DU (Only)
- Must obtain Approve/Ineligible Automated Underwriting Findings
- 30 Year Fixed Rate Only (No ARMs)
- Minimum FICO 700
- Texas Conversion loans and Texas 50(a)(6) are not eligible
- Subordinate Financing is acceptable with a maximum CLTV/HCLTV of 90%
Better Than a Bank Loan?
This wholesale jumbo mortgage was designed from the ground up as an alternative to the often painful process of trying to qualify for a jumbo mortgage from a big bank.
The challenge has always been that the jumbo mortgage world was dominated by big depository banks, made irresistible to qualified buyers because of very aggressive interest rates.
Once you go down the big bank path, many borrowers have found that the process is long, cumbersome, and often seem unreasonable. That’s where the wholesale jumbo mortgage really shines.
Big banks are seen a slow and lumbering, and almost a necessary evil. Before now, you have to put up with bank level service, and schedule, and jump through bank hoops.
Using a wholesale jumbo mortgage through a mortgage broker, you have an independent mortgage expert, working with consumer focused investor partners to bring products to the market.
Mortgage brokers offer flexible schedules, greater contact availability, more personalized service, streamlined loan process, and fast closing times. In most cases, you can close a wholesale jumbo mortgage in less than 30 days.
The Bank Buster
Perhaps the single biggest difference between the wholesale jumbo mortgage and big bank jumbo mortgages are the reserve requirements.
Big banks may ask for 12, or even 18 months of documented reserves at the close of escrow. Reserves are not nearly as rigorous from a mortgage broker.
This is a difficult hurdle for most families in California trying to buy even an entry level home, that meets the loan limit guidelines for this home loan.
Another way this loan program is different from some big banks is the ability to use a amortized payment on student loans, not a calculation equal to 1.25% or higher of your student loan balance.
Fannie Mae Automated Underwriting
This loan is underwritten using Fannie Mae Desktop Underwriter (DU), and receiving an Approve/Ineligible automated underwriting decision.
The automated underwriting status of Approve/Ineligible means that the loan meets Fannie Mae underwriting guidelines, but is ineligible for delivery to Fannie Mae through the secondary market.
Let’s take a look at the incredible advantages that the DU AUS status offers over the ultra strict underwriting guidelines that accompany most big bank jumbo mortgages.
Income documentation from a Fannie Mae automated underwriting approval can be quite effortless in most cases. If you have multiple sources, irregular hours, large commissions or bonuses, that’s where it gets a bit trickier.
As long as you’re working with a professional loan officer, they can walk you through what documentation is required to meet the underwriting conditions.
Common Income / Asset Documentation Requirements
- W2 Income: 2 Year History
- Commission / Bonus: In order to use commission and bonus income, you document a 2 year history of receipt, and then those two years are averaged over 24 months. This averaged number can then be added to your qualifying income.
- Self Employed: For all self-employed borrowers, the file must fully document the personal and business income regardless of whether or not the income is being used to qualify. The following documentation is required for each business:
- 2-years Personal 1040s
- 2-years Business tax returns
- Profit & Loss Statement
- Balance Sheet
- Reserves: Per DU findings. Expect 2 months or more if you need compensating factors
- Paystubs: Covering the last 30 days
- Any employment gaps greater than 30 days must be explained by the borrower through a letter of explanation. If you have a gap in employment exceeding 6 months in the most recent two-year history, you must have:
- At least 6 months on current job, and
- A documented 2-year employment history prior to the employment gap.
If you have part time or secondary employment (or seasonal employment), you must have a two-year history in the same line of work with no employment gaps.
Ineligible Property Types
The following property types or conditions are not eligible for a wholesale jumbo mortgage loan.
- Properties with resale restrictions are not allowed.
- Agricultural Zoning Properties zoned “agricultural” are not eligible. Properties with greater than 20 acres are allowable only on a case by case basis.
- Appraisal Waivers are NOT acceptable
High Balance Anywhere Portfolio Loan
If your loan amount doesn’t quite reach the minimum wholesale jumbo mortgage limit of $726,525, you have an alternative.
If you need Fannie Mae underwriting guidelines on a loan that does not quite reach Jumbo status, but is above the conventional loan limits, independent mortgage experts can help.
The High Balance Anywhere mortgage loan offers familiar, Fannie Mae conventional underwriting guidelines, with expanded loan limits. This loan is a conventional / jumbo hybrid loan, using DU AUS.
- Minimum FICO: 680
- Maximum Loan Limit: Fannie Mae Conventional High Balance Loan Limit
- Max DTI: 43% Debt to Income Ratio
Working with Professionals
I can not emphasize enough the importance of hiring a professional, experienced Realtor and loan officer when selling or buying your home.
When you call a lender from a TV or radio commercial, or click an ad you saw on the internet that has a catchy headline, you are playing competence roulette.
I personally have been in the business for almost 20 years now, and started this website 10 years ago to educate and empower consumers.
We have had over a million consumers visit this website and I have answered many thousands of questions from folks all over the Country.
I hear horror stories like this on a pretty regular basis. Quicken is not alone in running the type of business model that puts profit before people, they are just the biggest, and therefore the biggest offender.
If you are trying to buy or refinance your home in California, I can help. You may ask questions about your options below, or shoot me an email directly to firstname.lastname@example.org.
If you are outside of California, I can introduce you to a loan officer from our Expert Network that I personally know and trust.