What is a jumbo mortgage loan?
Jumbo mortgage or a super non-conforming mortgage is a home loan with an amount exceeding conforming loan limits set by the two government-sponsored enterprises that purchase loans from lenders, including Fannie Mae and Freddie Mac.
In order to fully understand Jumbo Mortgages or Non-conforming mortgages, one should first take a look at Conforming Loans. Home loans with amounts under the limits set by Fannie Mae and Freddie Mac are called conforming loans because they conform to the set standards.
In most states of the country, the limit on conforming loans for single-unit houses is $417,000. However, there are some high-cost states where real estate is valued higher, such as California, New Jersey, Alaska, etc. Jumbo mortgages are designed to provide financial assistance to people who want to buy a home in these high-cost states. The Jumbo mortgage limits vary from state to state. For example, in Georgia, a loan amount above $625,500 is considered to be a Jumbo loan. While in California, the limit varies from county to county.
Here's a quick rundown of our list:
- Larger Loan Amount
- Lower Interest Rate
- Plenty of Choices
- Harder to Qualify
- Higher Credit Score Necessary
- Harder to Find
Larger Loan Amount
When it comes to getting a large house, many people face a rather annoying situation.
With the conforming loans, you aren’t going to be able to cover the entirety of the home.
This means that you’ll have to take out multiple loans to cover the house or otherwise change what you’re looking for in a house to make the purchase more viable.
The larger loan limits of a jumbo loan make this process less of a hassle because you won’t have to have multiple loans and multiple payments to make.
If you’ve got good credit, then the loan allows you to be able to purchase a larger house without having to worry about the loan limits and restrictions that could stop you up.
Lower Interest Rate
Because lenders want to get people interested in this loan type, they are trying to lower the interest.
Even though it’s only a small decrease in the interest rate, it can make a huge difference in the long term.
If you don’t believe about the lower rates, you can check using my tool.
The lower interest rate, as well as the (now) lower down payment, can make this loan type a lot more attractive to people out there that really want to get a loan out.
The major stumbling block for people that want to get a house and a loan is the fact that the down payment is often huge.
Even though the higher loan amount that’s available for jumbo loans means that the down payment will still be large, it will be less than the original 20-30 percent that used to be the typical down payment.
Plenty of Choices
When it comes to loans, getting the one that best fits your situation is always important.
Many government-backed loans are limited in what you can get with them and sometimes there are too many choices when it comes other conventional loans.
The jumbo loans have three choices for loan types and from there, all you have to worry about are the loan terms.
This means that you have just enough choice to make this mortgage loan really work for you.
If you need to make sure that you have cash on hand after you get your loan, you can look into the interest only loan type.
If you want the lowest interest rate, then you will want to look at the adjustable rate jumbo loan.
Even though this loan’s interest rates do change from time to time, you’ll likely see that there’s less interest overall.
If you need a stable loan that doesn’t surprise you with major shifts in the payments, then you’ll want a fixed rate loan.
There’s something for everyone, which makes this loan just fantastic.
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What are the Different Loan Options (Besides the Usual Ones)?
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Harder to Qualify
Because there is a large risk associated with lending this much money, there are many hoops that you have to jump through to prove that you will be able to pay off the loan.
This means submitting a plethora of papers and documents for the lender’s consideration.
You will also have to locate all of these papers in order to put them together.
Depending on your income situation, this can be more difficult to track down.
This process can be lengthy and rather annoying for some people that need a house right away.
There might even be people that don’t want to deal with this kind of problem, so they’ll skip over the option of a jumbo loan.
It’ll be up to you if this larger loan is worth the time and energy that it would take to complete the process of getting qualified.
Higher Credit Score Necessary
When you look at loans, you’ll find that a good credit score is almost always a necessity.
With government backed loans, your credit will matter less; however, with high-risk loans like a jumbo loan, it will matter even more.
You won’t be able to get a loan unless your credit score is right around 700.
This score indicates that you have done well with debt in the past and that you’ll be more likely to pay on time and in full every time.
If your credit score isn’t around 700, then this loan type isn’t really an option for you.
You can still attempt to apply, but it is extremely likely that you will be denied this loan.
Harder to Find
While I will definitely be able to help you locate a jumbo loan, these loans can be harder to find in general.
That is because of the risk associated with them.
There are some lenders that feel confident enough to have them, but there are many lenders that aren’t necessarily sure that they are a good risk for them to have.
This means that there are just less of them out there.
You will have to be the most attractive borrower out there with the right amount of income and a good debt-to-income ratio in order to really look like a good risk to those that are willing to offer a jumbo loan.
What do you think?
Leave your comments below – or text/call me at (760) 297-4539.
Your Jumbo Mortgage Insider,