If you want to purchase a home that is priced higher than the average home, you should look into getting a jumbo mortgage loan. These are usually for high end real estate properties priced over $417,000. It’s important to understand how jumbo loans work to take advantage of their options.
What Is A Jumbo Loan?
A jumbo loan is a loan that exceeds the conforming loan limit. In most parts of the country, the conforming loan limit is $417,000 for single family residences. However, there are 14 states rated as high cost areas, such as California and Idaho, that have a $729,750 conforming loan limit. Santa Fe, New Mexico has a unique limit of $427,500. Properties with more than one family have other specific loan limitations. Check the Fannie Mae website for yearly updated limitations.
How Is A Jumbo Loan Different?
Jumbo loans may offer fixed and adjustable rates. Your lender can calculate the payments for these options to see how they can comfortably fit your income. Jumbo loans are typically tough to qualify for and often have higher interest rates than regular conforming loans (loans typically under $417,000).
Higher credit scores are generally required along with lower debt to income ratios. Since lenders may use different loan qualifications, be sure to ask your lender for specific loan requirements.
Other Options
Instead of jumping into a jumbo loan, you could increase the amount of your down payment. With more money down, you have a smaller loan. If you are already own a home, consider selling your present home so you can use the profit to make a larger down payment.
Try taking out 2 loans. You may get a lower interest rate on the first loan since it’s below the conforming loan limit. The second loan usually receives a higher interest rate, so it’s important to calculate the extra interest costs against the possible savings to check if it’s practical.
Whether you’re just considering moving to a high end housing area or if your employment is requiring you to relocate to a high end housing area, discuss it with a lender. Go through various financial examples to see which option will allow you to afford the payments without straining your finances.
