Jumbo Mortgages: What Is A Jumbo Mortgage? Is It Right For You?
The maximum conforming loan limit in most counties across the USA is $424,100. That limit is set by Fannie Mae and Freddie Mac – the two government-sponsored enterprises (GSEs) that regulate loans.
For many homebuyers, the amount is adequate to put a roof over their heads. But to some, it is just not enough to purchase that dream home. If you fall in the latter category, there’s a viable option in the form of a jumbo mortgage.
What is a Jumbo Mortgage?
By simple definition, a jumbo mortgage is a home loan whose amount exceeds the maximum limit set by Fannie and Freddie. Since the threshold for conforming mortgages is set at $424,100 in most counties, any loan whose amount exceeds that value is said to be a jumbo. It allows you to get an amount that is above the limit, making it possible for you to purchase a high-cost property of your liking.
Such properties require a lot of money, and if not well planned, the purchase can eat into your savings. To make your home ownership dream come true, you may have to take a home loan from a lender. However, due to the set limits of conforming loans, the amount might not be enough to finance the house of your dreams fully.
Luckily you can turn to a jumbo mortgage. It does come with some benefits.
What are some of the advantages of Jumbo Mortgage?
- A jumbo mortgage gives you the amount you need to purchase or build a high-cost home. Purchasing a luxury property requires a lot of money. Although taking out two or more conforming loans is an option, it is an expensive route. Plus you will have to make do with the struggle of keeping records, tracking your spending and increasing interest rates on each loan. A jumbo allows you to have the full amount in one mortgage loan.
- If the home of your choice is a high-cost property, you may be forced to dig deep into your savings. This is especially the case if you opt for a conforming loan because it won’t be enough. That may not be the case with a jumbo mortgage. It will save you the pain of having to tap into your savings to purchase a house.
- Qualifying for a jumbo mortgage is easier for borrowers in good standing. If your credit score is at least 660, you will be approved easily and may enjoy lower interest rates.
- Some lenders are not strict with the age-old requirement of at least 20% down payment. Nowadays you can secure a jumbo mortgage with as little as 10% down. You should, however, know that the higher your down payment on a jumbo mortgage the higher your chance of getting favorable lending terms. For example, the lender can lower interest rates when you put more money down.
Does this kind of mortgage have any considerations?
Despite the various advantages of jumbo mortgages, they do have a few potential drawbacks:
- Compared to conforming loans, it is more difficult to get approved for a jumbo mortgage. The requirements set by lenders often lock out some borrowers who can easily qualify for a conforming mortgage. With a jumbo, you will have to show the lender that you have a sustaining and substantial source of income that you can use to repay the loan and its interest in full.
- Jumbos typically have higher interest rates than traditional mortgage loans. You will have to pay a substantially big amount in terms of interest. The high interest is a move by lenders to cushion themselves against the risk they are taking if you fail to make your payments.
- You must have a good credit history to qualify for a Jumbo Mortgage. Most lenders will require a credit score of at least 660. That’s quite high compared to the score required for other loans like conventional (up to 580) and FHA (as low as 500).
The standout disadvantage here is that you will have to pay more interest than a traditional loan. That said, a jumbo will give you the best service regarding convenience because of the large amount bundled in a single mortgage loan.
Like most other mortgages, you can negotiate with a lender for better lending terms.
In case you need help securing a jumbo mortgage please contact us here at Mortgage Right and our team of experienced staff will get you the best deal.
Is Jumbo Mortgage right for you?
To answer this question, you will first need to answer the following questions:
- Are you looking to purchase a large house?
- How much is your house going to cost?
- Is traditional mortgage loan enough for you to purchase that house?
- Is the amount you need the set limit?
- Do you have enough money to facilitate the purchase?
If from your answers you can tell that a conforming mortgage just won’t cut it, then perhaps it is time to consider a jumbo mortgage.
As already discussed, jumbo mortgage do not conform to the set loan limits. The loan gives you a large amount – enough to finance a high-cost home. So if you’re looking to buy a luxurious property that costs more than the average home, then a jumbo mortgage is right for you.
Working with a good mortgage company can increase your chance of getting approved for a jumbo mortgage even with low down payment and less-than-required credit score. Here at Mortgage Right we make it our responsibility to help clients get approved for jumbo mortgages.
In case you have your eyes set on a beachfront property, luxury villa, or any other high-cost home feel free to talk to us, and we will help you get approved for a jumbo mortgage. Our team is dedicated to making our customers’ dreams come true.