What are Jumbo Loans and Who Can They Benefit?

What Is A Jumbo Loan?

A jumbo loan is a loan that does not conform to the guidelines of Fannie Mae and Freddie Mac. Which means if you are unable to pay back your loan, Fannie Mae and Freddie Mac will not secure the loans so your lender is solely responsible for the loss. These loans can sometimes be called non-conforming loans, as they exist outside of the standard conforming loan size limit.

In most counties for a single family home this limit is $424,100, however, in places like New York City and LA, the limit is higher as these are higher-cost housing markets. A jumbo loan is similar to a traditional mortgage, however, they are significantly harder to get approved for because they are seen as a higher risk on the lenders part. Below are some benefits of getting a jumbo loan and hopefully they can help you decide if one is right for you. A Fairfax mortgage broker can help you in this decision process.

Who Should Get A Jumbo Loan?

Jumbo loans are considered to benefit people who are high earners but don’t have a lot of excess cash or assets accumulated yet. You should also have an extremely good credit score, 700 or higher, and an extensively established credit history. Typically you’re in a better standing than an average home buyer seeking a conventional mortgage loan.

You may also have a retirement account that is well established that you have been investing in for a long time. If the account contains substantial sums, it is likely you are in a good financial standing to seek out a jumbo loan.

It’s Just One Loan

One of the major benefits and reasons you might seek out a jumbo loan is if you would otherwise have to take out two separate loans to cover the cost of your new house. Having a single loan will be easier to manage and keep track of, and provide you the ease of only having to make one monthly loan payment. Jumbo loans can also help keep you from dipping into your savings, as they will provide you with ample amount of money.

You Have Options

Getting a jumbo loan will allow you to be able to choose from many different loan programs, which will allow you to find the one that best suits you. You can consider getting a fixed-rate loan or an adjustable-rate loan, depending on how long you see yourself staying in your new home. There are many different options within both rate programs so you will be able to find the one that works well for you. Jumbo loans are a great way to borrow a large amount of money and still be able to retain some flexibility and choice in how you pay back the loan.

Larger Monthly Payments

If you can handle having larger monthly payments, jumbo loans might be a great option for you. These monthly payments will be larger than a conventional loan because you will have a higher interest rate. However, you will only be paying interest on one loan as opposed to having to pay interest on two if you chose to get more than one conventional loan instead.