Need A Jumbo Loan? Know These Four Things
Are you currently shopping for a home that will require a mortgage that is more than the typical conforming loan? If so, you are going to need a jumbo loan to secure the financing. Be aware that these loans are a bit different from the standard loans that your lender offers for home buyers in the following four ways.
Large Loan Limit
The most obvious benefit of a jumbo loan is the large loan limit. However, know that each state is going to have its own conforming loan limits where a jumbo loan is required. That loan limit is also based on the mortgage itself, with it not being based on the price of the home being purchased. This means that you can still get a conforming loan by providing a very large down payment to get your loan under the conforming loan limits. If you need more than that limit, then a jumbo loan is going to be for you.
High Interest Rate
Be aware that a jumbo loan is going to have a higher interest rate than a conforming loan. As you can imagine, this is due to the size of the loan being much bigger and a lender viewing your mortgage as more of a risk. As a result, the lender is going to charge a higher interest rate to borrow the money that you need. This is why you must tell your lender how much you will be borrowing when shopping around for a mortgage because a jumbo loan has its own unique rate.
Every mortgage needs to go through the underwriting process. Know that jumbo loans are going to have a more strict underwriting process where there is a chance that your jumbo loan could be denied. The underwriters are going to look at things like your debt-to-income ratio, your credit score, and the condition of the property that you are buying. What may have been acceptable for a conforming loan may not be acceptable for a jumbo loan. This is because the lender is unable to sell non-conforming loans to the government and must service them for the life of the loan.
High Down Payment
Many conforming loans require a minimum down payment that is quite affordable to the average home buyer. Know that a jumbo loan is going to require a larger down payment. This helps prove that your jumbo loan is less of a risk because you will already have a lot of money tied up in the property in equity.
Contact a loan provider to learn more about jumbo loans.