Buying a new luxury home is an exciting experience. From browsing online to touring the potentials and making the final decisions, there’s a flurry of thought and activity that comes with the home buying process. It’s exhilarating – and, at times, exhausting.
After the initial excitement comes the “nitty gritty” part of buying a new home. This is where buyers work to obtain a mortgage loan that best fits their needs and circumstances. In the 45+ years that Camelot Homes has been building luxury residences in the Phoenix-Scottsdale area, we’ve watched countless homeowners master this process. If you’re serious about getting a mortgage loan for a home in one of our luxury communities, here are some things you should know.
About Your Mortgage
Camelot buyers have a variety of down payment and loan options available. According to loan consultant Diana L. Fahringer of Wells Fargo Home Mortgage, most luxury buyers are looking for a non-conforming loan, which is a mortgage that doesn’t meet Fannie Mae or Freddie Mac’s traditional standards. Most of the time, this is because of the dollar amount involved: Mortgages over $424,100 are considered non-conforming “jumbo” loans. Her buyers generally put down 20-50% of the home’s total cost.
What’s the difference between conforming and non-conforming loans? Non-conforming loans have a reserve requirement. “We need to prove at least 12 months of asset reserve after closing,” Fahringer explains. “At least 50% needs to be liquid funds, and the remaining 50% can be from retirement funds.” These funds aren’t held as collateral; they just need to be documented to secure the loan.
How to Qualify
The qualification process for a luxury home mortgage isn’t that much different from the typical loan process. When applying for a jumbo mortgage, borrowers should have:
- Solid work history: “Borrowers need at least two years of work history in the same line of work. Alternatively, you need proof of continuing income such as retirement for at least 3 years,” says Fahringer.
- Strong credit score: 720 or better is preferred, though exceptions can be made for homeowners that put a larger payment down.
- Moderate debt-to-income ratio: This is the amount that potential buyers owe versus their income sources. Ratios should not exceed 43%, according to Fahringer. Note that this ratio includes your new mortgage payment with all applicable fees and taxes.
Your mortgage broker or lender will help guide you through the process of applying for a new mortgage loan, and advise you of any additional requirements as they come up.
What You’ll Need
The documentation you’ll need varies with your income, as well as other factors including lender requirements and loan type. Potential buyers can expect to provide:
- Proper Identification
- List of prior residences
- Proof of Income
- List/proof of Assets and Liabilities
- Current mortgage details and documentation, if applicable
What qualifies as proof of income? Sometimes it’s not as simple as handing over copies of your W-2. Self-employed buyers, for example, are expected to provide personal and business federal tax returns for the past few years. For those with standard wages, pay stubs, W-2’s and federal tax returns are required. Consult your lender or broker to determine exactly which documents you’ll need to bring.
From Start to Closing
Fahringer recommends keeping in touch and updating any changes in your income or assets while your new home is being built. With good communication, you’ll be on your way to closing in no time. Visit camelothomes.com for information on our new and existing communities, and feel free to contact us at 480-367-4300 with questions about buying a new Camelot home.