Jumbo Loans: What are they?
Choosing what type of mortgage to use takes a lot of research and understanding of how it will affect your finances. It is very important to learn about your different loan options and how they will affect you before deciding on a certain one. Even more important is to figure out how big of a loan you may need and if you can afford the monthly payments that come with it.
For a typical family, a conforming mortgage will suffice. That dollar limit has been $417,000 for a single-family home in most parts of the United States for nearly a decade. Fannie Mae and Freddie Mac recently announced this limit will remain unchanged in 2016, with the exception of 39 specific counties.
Any loan amount of $417,000 or less is eligible to be bought by Fannie Mae or Freddie Mac. If a loan is higher than the government-sponsored lending limits, it is considered a Jumbo Loan. Fannie Mae or Freddie Mac are typically unable to buy these from lenders. As an alternative, lenders will either keep the loan themselves or seek banks or outside investors to purchase these Jumbo Loans. These outside investors buy them on the secondary market in securitized bundles or on an individual loan basis.
Like any other mortgage, Jumbo Loans have a set of requirements borrowers must meet to be eligible. Since Jumbo Loans are for a larger amount of money they usually have very strict requirements. Borrowers' credit scores usually must be above 700, and a larger down payment may be needed to secure the loan. Loan originators will likely ask borrowers to show statements of income and assets that validate their ability to afford the payments on the Jumbo Loan.
Jumbo mortgages have many of the same term options as conforming loans. Adjustable-rate jumbo mortgages are available as well as fixed-rate options. Many borrowers may prefer adjustable-rate mortgages when interest rates are high. For Jumbo Loans, a small change in interest rates can mean thousands of dollars in savings if buyers chose to go with an adjustable-rate mortgage.
Like all home loans, Jumbo Loans have considerable details and information to review. We encourage you to use our website and local Chicagoland agents to further educate yourself about this type of loan. The Loan Experts at United Home Loans average 10 years experience in the lending industry throughout the Greater Chicago area. If you have any further questions, we encourage you to call United Home Loans at 708-531-8388.