What is a jumbo loan? These mortgage loans are bigger than standard conforming loans. Jumbo loans are great for people with a high credit score and are above the maximum loan limits set by conventional lending institutions. Here are some things to know before applying for one. If you are thinking about obtaining a jumbo loan, you should first know what a jumbo mortgage is. It is a type of mortgage loan that may not be available to everyone.
As with any mortgage, you should carefully consider the cost of a jumbo loan. Make sure that the monthly payments will fit into your budget and that you can meet the payments. Otherwise, you risk paying fees, damaging your credit score and possibly losing your home to foreclosure. If you are unsure of your ability to meet your mortgage payments, don’t proceed. Just remember that there are other factors that need to be taken into consideration before deciding if a jumbo loan is the right mortgage for you.
In a hot housing market, a jumbo loan may be the best option if you can’t afford a traditional home loan. A jumbo loan is a loan that exceeds the maximum conforming loan limits set by Fannie Mae and Freddie Mac, two government-backed organizations. These loans are higher risk than typical mortgages because they don’t meet GSE guidelines. However, they may be the right choice for many people in certain situations.
Before applying for a jumbo loan, you should have plenty of cash in your bank. Some lenders require you to demonstrate a year’s worth of mortgage payments to qualify. You will need to submit a substantial amount of documentation to the lender, including your bank statements, full tax returns, W-2s and 1099s. You’ll also need to have information on your investment accounts and the value of your second home.
Another thing to consider is your debt-to-income ratio. The ratio is the sum of all your monthly debt payments divided by your gross monthly income. If your debt-to-income ratio is more than 43%, you probably won’t be able to qualify for a jumbo loan. Lenders want to ensure that you can afford your mortgage payment. Therefore, a jumbo loan should be considered only for those who have a strong financial situation and can afford to pay a large amount.
A jumbo loan is generally more difficult to qualify for than a conforming mortgage. Because of the size of the loan, lenders are more selective in the types of jumbos they issue. A credit score of 700 or higher is usually the minimum requirement for a jumbo loan. However, there are other criteria that may warrant a lower credit score for a jumbo loan. Regardless, jumbo loans require a larger down payment.
If you are considering applying for a jumbo loan, know that rates are higher than the conforming loan limit. However, the difference is gradually closing. Since jumbo loans are more risky, they’re not sold to Freddie Mac or Fannie Mae. Therefore, it’s recommended to research your area’s jumbo loan limits before applying for one. You can also look for local mortgage lenders specializing in high-balance jumbo loans.