More than five million homes were sold in 2020 alone, but that doesn’t mean finding the right one at the right price is easy. Many looking for their dream homes are often restricted by loan limits.
That’s where a jumbo loan comes in. When you can’t borrow enough to afford your dream home, jumbo loans give you the needed flexibility.
So, what is a jumbo loan, how are they different from other loans, and what are their benefits?
That’s what we’re here to look at today. Below we discuss the ins and outs of jumbo loans and how you can get one.
What is a Jumbo Loan?
A jumbo loan is a loan that lets you borrow beyond the Fannie Mae and Freddie Mac loan limits. They’re designed to help you finance more expensive homes with much larger available loans.
Conforming loans set by the Federal Housing Finance Agency don’t allow borrowers to exceed a certain amount. Jumbo loans, on the other hand, are non-conforming loans that help you go past that.
How are Jumbo Loans Different?
Other than the amount of money you can borrow through jumbo loans, they’re quite similar to their contemporaries. Lenders still have to look at your credit score, assets, income, and other debts.
The difference first lies in the inability to secure mortgage insurance. With insurance, you might be able to get a lower down payment. Because jumbo loans are non-conforming, no such insurance is available.
Depending on your credit score, and other factors, you might have to pay higher interest rates with jumbo loans. This is always the case, but it might be a negligible difference based on your financial situation.
What Are the Benefits of Jumbo Loans?
The most obvious benefit to a jumbo loan is having more money available to buy your dream home. With larger loans you get way more options.
By options, we mean being able to choose between larger and more attractive homes. If you have a big family or want to house your parents or grandparents, getting a jumbo loan might be a crucial decision.
It also lets you choose between homes in more desirable markets. If you’ve had your eyes set on a specific neighborhood, a jumbo loan could very well help you choose from there.
So How Do You Qualify?
The loan qualification process for jumbo loans varies since most lenders have different ways of qualifying their borrowers. More specifically, the in-house underwriting guidelines will be different from lender to lender.
However, jumbo loans are generally reserved for those with sufficient cash reserves and higher incomes. Lenders can ask you for more than one appraisal for the property, and you’ll have to show proof of income.
At the end of the day, jumbo loans require you to show your proof of income and employment. It’s generally reserved for those with higher cash flow.
As such, you’ll have to put in a down payment of 20% or higher. Monthly payments of about 38% of your home will also be required.
Securing A Jumbo Loan Today
A jumbo mortgage might just be the next step towards getting your dream home. Use this guide to help you know if you can qualify for a jumbo loan and whether securing one is right for you.
Looking for expert mortgage advice from knowledgeable consultants? Contact us today and we’ll get you started on a solution right away.