I have mentioned the need for certain types of assets and reserve requirements for jumbo mortgages in past posts and when I did, I did so in general terms. At TheJonesGroup@SunriverRealty, we want the process of getting a mortgage and buying your first or second home as seamless as possible.
Mortgages are tricky things involving numerous moving parts, jumbo mortgages even more so. Because this is a financial transaction involving large sums of money, everyone needs to be comfortable. The idea of having a certain amount of assets and reserves in place is not a one-time event, it is a financial lifestyle. Having assets and reserves are not only prudent and part of a good emergency plan, it also shows the lender that you are more than ready to take on the financial responsibility of homeownership.
So what is meant by asset and reserve requirements?
In short, these are funds that will help expedite your application and create a mutually trusted agreement between you and the lender. Because the home you are looking to buy involves a large sum of money to be lent over a long period of time, the lender needs confirmation that you have the financial wherewithal to hold up your end of the bargain.
In a traditional or conforming loan, all of your assets will be considered as well as any obligations you have with other debt. In general, the higher the risk you may appear to be, the more reserves the lender may require. In a jumbo mortgage, the asset and reserve requirements are a bit more complicated.
What sort of asset and reserve requirements do jumbo mortgages require?
Most lenders require six months to several years’ worth of reserves, often from a variety of sources. You should be funding these accounts long before you begin the process of looking for home. This is what is known as seasoning.
One of the easiest way to create a good reserve is to save as much into your retirement accounts as possible. Although the lender may only consider 70% of the balance as a reserve, those accounts will work as a reserve, and if it isn’t needed, a retirement strategy. Stocks, bonds, the sale of assets, verification of deposits, and any other relatively liquid type of investment or fund will help. Business accounts will work best if you are the only owner, otherwise, the reserve may be subject to a certain percentage.
Are the reserve requirements different for second home?
In general, the asset and reserve requirements for a second home will be higher. The lender recognizes the presence of first home obligations and may impose stricter requirements. This varies from lender to lender, so shop around. The keys to success are to start early, adjust your debt downward as far as possible, build your asset base, and be a good consumer when it comes to shopping around.
How may we assist you?
On behalf of The Jones Group @ Sunriver Realty
Nola Horton-Jones, Principal Broker/Realtor | ABR, C-RIS, e-PRO, GREEN, RSPS, CCIM Candidate
Bryce Jones, Broker/Realtor | ABR, CRS, e-PRO, GREEN, GRI, RSPS, SFR
Karen Marcy, Broker/Realtor
The Jones Group @ Sunriver Realty | 57057 Beaver Drive | Sunriver, OR 97707
Mobile: 541-420-3725 | Mobile: 541-420-4018 | Mobile: 503-327-9611 | Fax: 541-593-5123
Licensed in Oregon