Alternative Loan
Jumbo Loan
Jumbo Loan
What is a Jumbo loan?
A loan is considered Jumbo if the loan amount exceeds the conforming loan limit set by the Federal Housing Finance Agency. The primary advantage of this loan program is to allow borrowers to take out a mortgage that exceeds this limit. Often this loan type requires rigorous credit requirements and stellar credit.
Jumbo Loan
What are the qualifications for this type of loan?
Here’s a detailed look at the basic qualifications for a Jumbo loan.
- A credit score of at least 680
- A debt-to-income ratio of no more than 43%
- Minimum down payment of 10%
Jumbo Loan
What are the benefits
There are several pros that Jumbo loan can provide, including:
The biggest benefit of jumbo loans is that you can obtain more funding to purchase your dream home. This can mean the difference in getting into a high-quality property. You will also not have to take out multiple loans.
Surprisingly, even though they are larger-value loans, the rates offered for jumbo loans can be (slightly) lower than conventional loans. This is for three reasons. First, demand from investors drives down the yields on jumbos. Second, many lenders will keep these loans on their books, not sell them, which adds to their bottom line. This also means jumbos are not reliant on secondary market pricing the way conventional loans are. Finally, because they keep them on their books, lenders will be pickier as to whom they will lend to in order to reduce their risk, but they are competing for the best clients.
Not being tied to Fannie Mae, Freddie Mac, or any wholesaler restrictions, lenders can provide borrowers more leeway, choosing what fits them best. A fixed-rate mortgage of 15-30 years is possible, or an adjustable-rate mortgage with fixed periods of 3-10 years can easily be found with jumbo loans. Other personalized options are also available.
