Luxury Real Estate: Evaluating Mortgage Options For High-End Properties

Luxury Real Estate: Evaluating Mortgage Options For High-End Properties

Choosing a luxury home can certainly be exciting, but it’s bound to be costly, so you want to make sure you’re getting your dream house, along with a mortgage that makes sense for your budget. Fortunately, there are a variety of loan options, ensuring that you find the one that best suits you.

Figuring out what the payment might be for a given loan amount is a great first step, as it allows you to look at luxury homes within your price range. Use a loan calculator like the one at What’s My Payment to take the guesswork out of it. Then have a look at the mortgage options here.

Jumbo Mortgage

A jumbo loan is simply one that exceeds the conforming limits for the place you plan to buy. In most areas, a conforming loan is capped at $424,100, which is not enough to purchase a luxury home. A jumbo mortgage allows you to take out a loan for a much larger amount, usually up to $2 million.

It’s not too difficult to find a lender that offers a jumbo loan, but keep in mind that you may need a high credit score and a higher down payment to qualify. For luxury homes costing more than $2 million, you will need to consider a super jumbo mortgage. This kind of mortgage is more difficult to find, however, as very few lenders offer them.

Bank Statement Loan

This kind of loan was designed with self-employed buyers in mind. That is, those who work for themselves and cannot document their income on their yearly tax returns. They are a good choice if you’ve been self-employed for at least two years. Using bank statements as proof of income allows a lender to determine whether or not the buyer can afford the loan for a luxury property.

You will need to have 12 months of bank statements, which will replace your yearly tax paperwork as proof of income, as well as proof of deposits into your bank account. Keep in mind with this kind of loan that interest rates and down payments may need to be higher than a traditional home loan. However, a bank statement loan can be approved for those with low credit scores and there are typically no prepayment penalties.

Non-QM Mortgage

Also called subprime mortgages, this kind of loan recently became available again, after being eliminated during the housing crisis in the last decade. There are several niche options available, including those for buyers with poor credit, bankruptcies or foreclosures on their record, or who have no down payment. A subprime mortgage is also an option for individuals who are self-employed.

If your finances have recovered and you’re ready to purchase a luxury property, this kind of loan can be a lifesaver when you can’t qualify for a conventional home loan with all of its government restrictions. Keep in mind that rates and closing costs are likely to be higher, and there isn’t a long list of lenders who offer a subprime loan, so it may be difficult to find financing to suit your needs.

The biggest thing to keep in mind when looking for a luxury home loan is the loan limit of the lender. It may take a bit of effort to find the right loan for your needs since large loans are a bit harder to find. Be prepared to shop around, and don’t be afraid to look online, as well as local lenders in your area. Your real estate agent is a good resource for this as well. While it can take a bit of time and work, ending up with the home of your dreams makes it well worth it. In no time at all, you’ll be basking in all the luxury your new house has to offer.


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