If you are looking to purchase a home that is more on the expensive side, you may be wondering if there are loan options large enough.
Conforming loans typically must adhere to the limits and requirements set by Fannie Mae and Freddie Mac. In most areas, the conforming limit is $647,200. Whereas, jumbo loans do not have to adhere to those requirements and can be obtained through private lenders. With that being said, jumbo loans may be a great option for you if you are in need of a loan that is larger than the local limit for conforming loans and don’t have the extra cash to put down a large down payment.
A benefit of choosing a jumbo loan is that there are no requirements regarding mortgage insurance. However, since this loan may come at a higher risk for the lender, it typically has stricter qualification requirements than conforming loans that have lower limits.
You should expect your lender to request your credit score and debt-to-income ratio. This compares your minimum monthly payments and recurring debt payments to your monthly income. Proof of consistent income, cash reserves or liquid assets, and tax returns are also common things that a jumbo loan lender would require.
All this to say, it’s not uncommon for lenders to ask the borrower to meet certain requirements before approving them for the loan. Since jumbo loans are higher risk for lenders, these extra precautions are to ensure they are lending money to someone who is responsible and has the ability to make payments.
Currently, interest rates tend to be .5%-.75% higher than conventional rates depending on loan to value and credit score. However, jumbo loans allow the borrower to keep more cash in their pocket when buying their million dollar dream home.
The historically low rates in today’s market are something that buyers should really leverage as much as possible, as well as seeking a jumbo loan that doesn’t require as much cash in order to close.
Need more information or want to determine whether jumbo loans are right for you? Contact us today!