What is a Jumbo Loan and is it a Non-Conventional Loan?
A jumbo loan is a type of mortgage loan that exceeds the limits set by the Federal Housing Finance Agency (FHFA). The FHFA sets the conforming loan limit based on the average home prices in a particular area and the loan limit for 2021 is $548,250 for most of the US.
However, in areas where the cost of living is higher, the limit can go up to $822,375. Jumbo loans are designed for individuals looking to buy a higher-priced or luxury home where the cost exceeds the conforming loan limit.
How does a Jumbo Loan differ from a Conventional Loan?
A conventional loan is a mortgage loan that is not guaranteed or insured by a government agency, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Conventional loans typically have lower interest rates and may have more lenient lending requirements than government-backed loans.
On the other hand, jumbo loans do not conform to the guidelines of government-sponsored entities like Fannie Mae or Freddie Mac, and are considered non-conforming loans. This classification can often make them more challenging to obtain than conventional loans.
Why would someone opt for a Jumbo Loan?
Jumbo loans offer several benefits, including:
How to qualify for a Jumbo Loan?
Qualifying for a jumbo loan is often more challenging than qualifying for a conventional loan. Lenders require borrowers to have a higher credit score, a lower debt-to-income ratio, and a larger down payment to offset their increased risk in lending a larger amount.
The borrower must also have documentation to prove their income and assets and show a history of responsible financial behavior. Unlike most conventional loans, which only require a 3% down payment, jumbo loans typically require a minimum of 10-20% down payment.
At Mortgage Brokers Pro , we have several programs that provide competitive rates and flexible terms. Our jumbo loan program is designed to help you get the loan amount you need to purchase your dream home.
How do Jumbo Loans help the Real Estate market?
Jumbo loans are an essential part of the real estate market, especially in high-cost areas. With the rise in housing prices, jumbo loans give homeowners more financing options to purchase luxury homes.
Jumbo loans also help the real estate market by providing liquidity for high-end properties. Without jumbo loans, many individuals and families would be unable to afford their dream home, which would lead to lower demand, lower real estate prices, and negatively impact the economy.
What are the Pros and Cons of Jumbo Loans?
Pros:
Cons:
At Mortgage Brokers Pro , we offer several jumbo loan programs to meet your needs. Our experienced staff will work with you to find the best program to finance your dream home.
Can Jumbo Loans be refinanced?
Yes, Jumbo loans can be refinanced, allowing homeowners to adjust their interest rates and payments, get cash-out, or finance home improvements.
With rates at historic lows, refinancing a jumbo loan may lower monthly payments and provide access to lower interest rates, making it a good time to consider refinancing.
What is the future for Jumbo Loans?
As housing prices continue to rise, jumbo loans will become more critical to the real estate market. In 2021, we may see more relaxed lending requirements as the economy recovers and to meet the demand for jumbo loans.
At Mortgage Brokers Pro , we are always ready to help our clients navigate the complex world of jumbo loans. Our highly trained staff will work with you to ensure you get the right loan to suit your needs.
In Conclusion
A jumbo loan is a non-conventional mortgage loan designed for individuals looking to buy higher-priced or luxury homes where the cost exceeds the conforming loan limit. While they have more stringent eligibility criteria, they offer several benefits, including access to higher loan amounts, competitive interest rates, and flexible terms.
Mortgage Brokers Pro offers several jumbo loan programs designed to fit your specific financing needs. Contact us today, and we will be happy to assist you in getting the right loan for your dream home.