High-end homes require larger sums of money than most housing. This is where jumbo loans can become an option. Typically, jumbo loans go beyond the established maximum loan amounts under Fannie Mae and Freddie Mac conventional loan limits. Because of these higher amounts, you need to come up with a higher down payment compared to traditional loans.
What is a Jumbo Loan?
Jumbo loans have more demanding requirements than smaller mortgages. In many parts of the United States, the threshold for jumbo loans is around $400,000. However, for areas with the highest cost of housing, the threshold can reach up to $600,000.
The United States has more than 3,000 counties. Ninety-three percent of these countries define jumbo loan as a mortgage over $424,000. Around three percent of these counties define a jumbo loan as a mortgage higher than $636,150. These regions are called the highest-cost housing markets. They include cities like San Francisco, New York and Los Angeles. The remaining four percent of counties define jumbo loans as mortgages ranging between $424,100 and $636,150. While these markets have higher prices, they are not as high as those in the highest-cost brackets.
Why Get Jumbo Loan?
There are many benefits to getting a jumbo loan. Some of these include:
- Loan amounts up to more than $2 million are accessible
- Loan options that come with fixed and adjustable rates (ARMs)
- Range of loan terms – not limited to terms like 15 and 30 years
- Range of allowable properties including warrantable condominiums, single-family residences, co-operative units and Planned Unit Developments (PUDs)
How to Qualify
Unlike traditional loans, the underwriting process for jumbo loans may require two appraisals compared to one. If you’re going to scout for jumbo loans, you’ll find that they have higher down payments. The minimum down payment can range from 15 percent to 20 or 30 percent depending on the lender. Also, many lenders of jumbo loans require a credit score of 700 or more, 6 to 12 months’ worth of bank reserves and a debt-to-income ratio of 43 percent or less. This is why you need to make sure you understand the terms of the loan and what you’re getting into. If you feel like you qualify for a jumbo loan and need one then you need to work with a lender that has the expertise and experience to guide you.
Columbus OH Mortgage Broker has the right people to guide you through your jumbo loan journey. Just like other types of loans, you need to think about whether you should proceed or not. Loans often require a long-term financial commitment, especially those involving large sums of money. Talk it out with your lender and see what option is best for you.