Buying a luxury home is a different process from purchasing a conventional or tract home. There is more money involved in the transaction, so naturally, the risk is greater. Also, you must trust only the best realtors from Birmingham, Alabama to help you find an ideal luxury home.
The process can be slower and if you plan on buying a luxury home and not paying cash, you will most likely need to obtain what is referred to as a jumbo loan.
What is a luxury home?
It might surprise you to know that it is not only the price that defines luxury homes. While the concept can best be defined by perception, there are several additional characteristics that define a luxury home:
Since everything in real estate depends on location, a basic defining point of a luxury property is “a home that goes above and beyond [what is] typical for the market,” according to the real estate editor at U.S. News, Devon Thornsby. In the Birmingham area, think of areas like Forest Park, the Historic Birmingham area close to UAB, Mountain Brook, Vestavia, the historic Hollywood district of Homewood, and luxury neighborhoods of in Hoover. These areas are in high demand and people are willing to pay more for the area.
What is a jumbo loan?
If you will be pursuing a jumbo loan when buying a luxury home, you will need to begin the process early while you are shopping for homes.
Also known as a non-conforming loan, a jumbo loan is needed to purchase a property that has a higher price than Fannie Mae’s and Freddie Mac’s limits for conforming loan. This limit has stayed steady at $417,000 for a single-family home and increased to $424,100 last year and will remain at that level for 2018 in Birmingham according to FHA loan guide.
Qualifying for a jumbo loan
The requirements are more stringent than those of conventional loans and will vary by lender.
The buyer will need a higher credit score (typically a 720 minimum). Generally, a 20% down payment is required, although borrowers with high credit scores can find mortgages with a 5 percent down payment requirement. However, homes with higher price tags can require between 25% and 40% according to Polyana Da Costa at bankrate.com.
You will need to prove that you can make the monthly payment, just like with all loans
This means proving:
The additional steps in the qualification process tend to carry higher closing costs. These extra steps can include multiple appraisals of the property, for example.
If you are in the quest for new homes for sale in Birmingham, Alabama, our team can do it for you. We have an expertise when it comes to buying luxury homes in Birmingham.
© Christina James and BirminghamWelcomeHome.com, 2018. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Christina James and BirminghamWelcomeHome.com with appropriate and specific direction to the original content.