Many higher-end homes cost more than the conforming loan limit — especially in today’s hot housing market. Because of this, luxury homebuyers typically need what’s called a jumbo loan (or jumbo mortgage).
Jumbo loans are high-balance loans you can use to either buy or refinance a home. In most markets, you’ll need one for any house priced higher than $548,250. In particularly high-cost areas, the threshold may be higher.
Will you be using a jumbo loan for your next purchase or refinance? Here’s what you need to know:
Potential Advantages of Jumbo Loans
Jumbo loans let you buy homes priced beyond what government-backed and conventional mortgages will allow. They also don’t require mortgage insurance, which can save you significantly in the long haul.
Potential Drawbacks of Jumbo Loans
The biggest downside is that jumbo loans come with higher rates and stricter lending requirements than smaller loans. You may need less debt, a higher credit score, more in cash reserves, or a bigger down payment in order to qualify.
Note: Lending standards have loosened a bit on these loans in recent months, so qualifying is not as difficult as it once was.
Where to Get a Jumbo Loan
Not all lenders offer jumbo loans, but most major lenders and banks do. Make sure you shop around, as rates and qualifying standards can vary widely from one lender to the next.
It’s a good idea to analyze your cash flow when considering a jumbo loan. Tying up a large chunk of money in real estate has risks, and it could make it hard to cover bills if you don’t budget carefully.
Need help evaluating if a jumbo loan is right for you? Searching for your next property? Get in touch today.
