Jumbo loans are often the only option for many borrowers who want to purchase luxury homes or homes in areas with competitive markets and high costs of living. Unfortunately, many homeowners still fail to meet the strict lending requirements for traditional jumbo loans, making them unable to purchase their dream homes.
That’s where near miss jumbo loans can help. A near miss jumbo loan is a low down payment jumbo loan and differs from traditional jumbo loans in several ways. Firstly, they’re non-QM loans with less stringent requirements and lower down payment options.
To allow more borrowers to qualify for jumbo loans, Griffin Funding has expanded the underwriting box while still maintaining very competitive rates. We’ve designed these loans with “common sense” underwriting in mind so we can offer our near-miss jumbo loans with as little as 10% down.
We will allow:
- 620 credit score for loan amounts up to $2.5 million (30% down required)
- 640 credit score for loan amounts up to $2.5 million (20% down required)
- 680 credit score for loan amounts up to $2 million (10% down required)
- Up to 55% debt-to-income ratio
- As little as 10% down on a second home
- As little as 15% down on an investment property
What Is a Near Miss Jumbo Loan?
A near-miss jumbo loan, also known as a big bank turndown, is a subtype of a jumbo loan that is designed for individuals who need a large sum to purchase a home because they do not have the cash available to do so.
A near-miss jumbo mortgage is considered a non-qualified mortgage (non-QM) loan. This type of alternative loan includes full documentation loans (W2’s, tax returns, etc.), asset-based mortgages, which are recommended for high-asset borrowers, and bank statement loans for self-employed borrowers. Non-QM loans are not required to comply with the Consumer Financial Protection Bureau’s standards for qualified mortgages.
To accommodate the needs of a growing population of potential borrowers who do not meet the stricter requirements of Freddie Mac or Fannie Mae loans, near miss jumbo mortgages were created with less restrictive parameters. While you still need a respectable credit score and substantial income, near miss jumbo loans are more forgiving if you have fluctuating cash flow or good credit debt, like large student loans.
Near miss jumbo mortgages are available on owner-occupied primary residences and second homes. We are one of the only lenders in the country that only requires 10% down on a second home or vacation home.
Near Miss Jumbo vs. Jumbo Loan
As we’ve mentioned, a near miss jumbo loan is a type of jumbo loan. These low down payment jumbo loans are non-QM loans, while a jumbo loan is a type of conventional home loan with strict requirements. Both options are ideal for individuals who want to purchase a home that exceeds conventional conforming loan limits set by the FHFA.
Traditional jumbo loans have strict requirements because they’re a higher risk for the lender, making them difficult to qualify for. Lenders typically look for high credit scores and at least 20% down on the home.
A few key differences between near miss jumbo and standard jumbo loans include:
Jumbo loans are designed for individuals who can prove their ability to repay through creditworthiness, so higher credit scores are typically required. Most lenders will look for at least 700 or above, but requirements may vary.
With near miss jumbo loans, borrowers can qualify with a credit score as low as 620, making it easier for individuals of all types to purchase luxury homes or homes in competitive markets.
Jumbo loans require a DTI of 43% or lower, depending on the lender.
However, with near miss jumbo loans, borrowers can qualify with a DTI as high as 55%.
Financial Health Documentation
Traditional lenders must verify income and job history through traditional means. They’ll ask for pay stubs and tax returns.
Some borrowers don’t fit the stringent criteria because they’re entrepreneurs, retired, or self-employed. Near miss jumbo loans are a good option for individuals who take deductions on their tax returns to reduce their taxable income and don’t qualify for a traditional jumbo loan.
Jumbo loans’ down payments are typically higher because they’re a higher risk loan.
Since near miss jumbo loans are non-QM loans, lenders can require any down payment they choose. At Griffin Funding, our near miss jumbo loans allow you to qualify for a loan with as little as 10% down.
The amortization on Jumbo loans’ is typically principal and interest.
Since near miss jumbo loans are non-QM loans, lenders allow interest only payments for up to ten years. At Griffin Funding, our near miss jumbo loans allow you to qualify for a loan based on the interest only payment.
When Is a Near Miss Jumbo Loan Recommended?
Typically, near miss jumbo loans are recommended for those who fall just short of approval for traditional mortgage loans and standard jumbo loans—like individuals who have previously been turned down for a mortgage loan due to a high debt ratio, a recent credit event, low income reported on their tax return, or who have been self-employed for less than two years. Those with high student loan debt are also struggling to buy homes and invest in real estate because of strict credit requirements and may be well suited to this type of loan.
Near miss jumbo mortgages are popular amongst young aspiring first-time buyers, long-term homeowners trying to refinance, cash buyers looking to preserve their capital, or those who want to purchase a second home. If any of these circumstances apply to you, you should consider a near miss jumbo loan to secure the funds you need.
Do Jumbo Loans Require 20% Down?
While standard jumbo loans typically require at least 20% down to lower the risk of the lender, near miss jumbo loans through Griffin Funding do not.
Can You Get a Jumbo Loan with 10% Down?
Yes, qualifying applicants can secure a jumbo loan with 10% down. This lower jumbo mortgage down payment has opened the opportunity of homeownership to a larger demographic. The required down payment will depend on several factors, including the amount you wish to borrow.
What Qualifies You For a Near Miss Jumbo Loan?
Near miss jumbo loans have expanded the luxury of homeownership to more borrowers. Instead of being quickly dismissed based on black-and-white qualifications, borrowers are viewed on a broader level. Near miss jumbo loans allow lenders to consider a more comprehensive borrower profile, including a slightly lower FICO score, to determine your ability to repay the loan.
As such, we offer more flexible terms for qualifying for a near miss jumbo loan:
- Instead of 20% down, we will allow as little as 10% down up to $2 million (loan amounts available up to $5 million with more down-payment)
- Instead of the normal 43% debt-to-income ratio limit, we will allow you to go up to 55%
- Instead of a 720+ credit score, we will allow a 620 credit score (No credit events in the last 4 years and credit scores less than 720 require larger down payments)
- No mortgage insurance
- Interest Only
On some jumbo programs, instead of showing tax returns that might not accurately reflect your income to qualify, we can use bank statements to verify income if you are a self-employed real estate buyer.
Maximum Near Miss Jumbo Loan Amount
Griffin Funding strives to provide customer-centric lending options, including sufficient loan amounts for our near miss jumbo mortgages. Borrowers can get a near miss jumbo loan for up to $2 million with a 10% down payment or up to $5 million with a larger down payment.
- Get a loan for up to $2 million with a 10% down payment
- Get a loan for up to $5 million with a 30% down payment
Flexible Loan Terms
Instead of just offering a 30-year or 15-year fixed-rate we also offer a 40-year fixed rate, 7-year, and 5-year adjustable-rate mortgages (ARMS) with an interest-only option for the first 10 years.
The lower interest rate in the early years of your mortgage benefits you in the long run because you’ll accumulate less interest on your loan, especially if you can pay off a significant portion within the first few years. If you’re making interest-only payments at first, you may end up paying higher mortgage payments after the established term, but this may be beneficial if you are focusing on paying off student loans, investing in multiple properties, or have restricted cash flow for other reasons.
Imagine being able to buy your dream home for a purchase price of $3.5 million by putting 15% down. You would have a loan amount below $3 million that you could finance with a 30-year fixed-rate mortgage that has an interest-only payment for the first 10 years. (Interest-only requires 15% down up to $3 million or 10% down up to $2 million.)
Imagine being able to buy your dream home for $2.2 million by only putting 10% down. You would have a loan amount below $2 million that you could finance with a 30-year fixed rate mortgage or 7-year arm.
Near Miss Jumbo Loans: Frequently Asked Questions
Do Jumbo Loans Need Mortgage Insurance?
Private mortgage insurance (PMI) is not required with near miss jumbo loans or jumbo loans because they typically require a higher down payment. However, since near miss jumbo loans may allow a down payment of 10% or lower, borrowers are still not required to pay for PMI. Still, this may vary by lender. For example, Griffin Funding does not require PMI with jumbo or near miss jumbo loans.
In most cases, lenders may look at the home’s equity to determine whether or not your loan needs PMI. Since jumbo loans are designed for luxury homes or homes in competitive markets that exceed conforming loan limits, even a lower down payment is much higher with jumbo loans than the average home loan. Therefore, there are larger amounts put down to reduce the lender’s risk, so there may not be any need for PMI when loan amounts and down payment are higher.
It’s always a good idea to talk to your lender about whether you’ll be required to get PMI because it can drastically increase the monthly cost of homeownership. PMI for jumbo loans can be expensive, so you’ll want to choose your lender wisely and learn about their PMI and down payment requirements before committing. In addition, if you’re putting down less than 20% and don’t have to pay PMI, your interest rates will likely be higher because your loan is riskier.
What Are The Benefits Of a Jumbo Loan?
The most significant benefit of jumbo loans is that they allow you to purchase homes above the conforming threshold for traditional loans in competitive markets.
Even if you qualify for a traditional home loan, the home you want to purchase may be too expensive for a traditional conventional loan. However, a jumbo loan allows borrowers to take out higher loan amounts.
Other benefits of jumbo loans include the following:
- Higher loan amounts: With jumbo loans, you can get higher loan amounts to afford your dream home without taking out multiple loans.
- Competitive interest rates: Jumbo loans are larger-value, but the rates can be lower than conventional loans because many lenders don’t sell them. However, even when the interest rates aren’t lower than conventional loans, they remain competitive.
- Flexibility: Jumbo loans don’t have wholesaler restrictions, allowing lenders to choose who they want to lend to and allow different types of jumbo loans, including fixed- and adjustable-rate mortgages.
- Lower down payments: Conventional loans require a down payment of 20% if you want to avoid PMI. However, many jumbo loan lenders don’t require PMI for lower down payments. With Griffin Funding, you may qualify for a jumbo loan with 10% down.
What Are The Disadvantages of a Jumbo Loan?
Of course, no home loan is perfect, even though jumbo loans allow you to qualify for higher amounts with competitive interest rates and lower down payments. A few disadvantages of jumbo loans include the following:
- Vetting: Before you’ll get approved for a jumbo loan, the lender will vet the property to ensure it qualifies.
- Higher credit scores needed: You should have good credit before applying for a home loan. However, you may still qualify for a jumbo loan with a lower credit score, but the lower your score, the higher your down payment will need to be.
- High-income requirements: While we can review your financial health in several ways, including using bank statements and traditional methods, lenders like to see high income to ensure borrowers can repay the loan.
With The Recent 2023 County Loan Limit Increases do I even need Jumbo Loan?
Yes, it is true that the FHFA recently increased the 2023 conforming loan limit to $726,200 and up to $1,089,300 in some high cost areas. Whether or not you are in a county with a conforming loan limit of $726,200 or a county with a high-balance conforming loan limit of $1,089,300 it is likely that you still may need jumbo financing due to the recent increase in home prices. You can look up your county loan limit here.
Apply For a Near Miss Jumbo Loan
If you’ve encountered obstacles trying to qualify for a mortgage, it can feel like you’re out of options. Our knowledgeable team can help you move in the right direction by determining whether a near miss jumbo loan or another non-QM loan is the best solution for you.
The home-buying process may seem complicated and drawn out, but our experts prioritize efficiency and strive to close purchase loans within 30 days or less. With diverse and flexible mortgage options, like our 10% down jumbo loan, securing a loan with Griffin Funding makes applying for a loan and purchasing your first or second home significantly easier.
Are you ready to purchase your dream home in a competitive market but worried you’ll be turned down for a traditional loan? Consider our near miss jumbo loan instead. Contact a Griffin Funding representative to learn more or begin the application process.