Buying a home can be an exciting experience, but it can also drain your bank account. Fortunately, mortgage loans are available for many residential properties. If you decide to buy a property with a higher price tag than the loan limits established by the Federal Housing Finance Agency (FHFA), you may be worried about getting a loan. While it's true that conventional mortgage loans may be off-limits in this situation, you can still apply for a jumbo loan. Get the facts about jumbo loans below so you can decide whether to request one for your next home.
What are jumbo loans?
A jumbo mortgage loan is a type of loan that exceeds the FHFA's conforming loan limits. It is also sometimes referred to as a non-conforming mortgage. These loans are typically used for expensive properties or homes in high-cost areas like California, New York, or Hawaii where real estate prices tend to be higher than the nationwide average.
What are the benefits of jumbo loans?
Jumbo loans may be an option for people who cannot qualify for a conventional loan due to their future home's sale price. Additionally, since they generally require a larger down payment than conventional loans, jumbo loans can provide more security if the borrower defaults on the loan. Another benefit of these types of loans is that they may come with lower interest rates than other types of financing.
How do you get a jumbo loan?
Applying for a jumbo loan is similar to applying for any other type of mortgage. You will need to submit proof of income, such as pay stubs and tax returns, plus documentation of your assets. Your lender will likely also review your credit reports. Additionally, you may be asked to provide information about the property you are buying.
Some lenders also require applicants to make a larger down payment for a jumbo loan than they would for a conventional mortgage. Generally, the minimum required down payment for jumbo loans is somewhere between 10% and 20%. However, this can vary depending on the lender you choose.
As with any loan, it's important to read all of the fine print before signing on the dotted line. Be sure to ask questions and get clarification if needed so that you understand all of the terms and conditions of your jumbo loan.
If you're in the process of buying a luxury house, a jumbo loan may be the right option for you. Contact a professional to learn more about jumbo loans.