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What is a Jumbo loan?
A jumbo loan is a type of mortgage used to finance properties that are too expensive for conventional conforming loan. The maximum amount for a conforming loan is $ 484,350 in most counties, as determined by the Federal Agency Housing Finance. Households that surpass the local conforming loan limit need a jumbo loan.
Also known as non-conforming conventional mortgages, jumbo loans are considered riskier for lenders because these loans aren’t guaranteed by Fannie and Freddie, which means that the lender isn’t protected against loss if a borrower does not pay. Jumbo loans are typically available with a fixed interest rate or an adjustable rate, and come with a variety of terms.
Who are eligible for it?
Underwriting criteria are stricter for jumbo loans because loans are larger and riskier for lenders. Lenders may require your FICO score to be greater than 700, and sometimes as high as 720, to qualify for a jumbo loan.
How to get this loan?
Many lenders make loans above the conforming loan limits.
Especially investment banks tend to have the most competitive rates on jumbo loans. “A high-quality lender can offer a jumbo loan as promotional items in order to sell other financial products for the borrower.”
Speak to various lenders or to a broker who can check with several lenders at once.
Few borrowers will qualify for special loan programs such as medical loans available to licensed physicians and dentists. This program is available in jumbo loan amounts of zero, 5 or 10 percent down, several financial institutions, including Fifth Third Bank, SunTrust Mortgage and Citizens Bank.
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What credit score is required for this loan?
Credit score requirements are higher for a jumbo loan. Some conforming mortgage programs are available for applicants with a credit score as low as 500 but for a standard jumbo loan, one usually requires a credit score of at least 680. Many jumbo loans require a score of 700-720 or higher.
Advantages and Disadvantages
Advantages
- This allows larger loans and in some cases even better interest rates. In addition, some creative options are available for use with a second mortgage.
- If you are a high-earner, and hold a solid credit history and a larger down payment this may be the right loan for you.
- If you have a good credit score above 680 you will be more likely to qualify.
- You can get a jumbo loan with only 5% -10% in some cases, if your credit score is above 680.
- The total amount you want to finance, credit score and down payment will play an important role in whether you get funding.
Disadvantages
- Not guaranteed by the Federal Housing Administration or the Department of Veterans Affairs.
- The rating for a jumbo mortgage may be more difficult than regular loans.
- If your credit score is below 680 you probably have to put a much larger down payment to offset the risk of a lower credit score.
- You will need at least 6 months of mortgage payments on an asset account.
- If you are looking for a loan of more than $ 5 million that may have to look at a portfolio lender offering home loans super jumbo. Be sure to check with your licensed mortgage advisor for your best choice.
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