One of the ways you can buy a more expensive house is through a jumbo loan. These are popular with buyers who are looking for a home that costs more than $417,000, or up to $625,500 in areas of the country that have the highest costs. Most buyers don’t fall into the category of needing a jumbo home loan, because they choose more modestly priced homes that are affordable to them. However, for buyers that need a larger home loan, it’s very good to know that there are options they can consider. Not everyone who buys a more expensive home is wealthy and can pay cash, so a financing solution for them is important. There are a lot of myths that surround jumbo loans, though, so it’s important to separate fact from fiction.
1). It’s very difficult to qualify for a jumbo home loan, isn’t it?
If you’re considering a jumbo loan, you want to talk to your lender and make sure it’s the right choice for you. Not everyone can qualify, just like not everyone can qualify for a standard, conforming mortgage, either. The first step toward getting qualified is to find a lender who offers jumbo loans and start working with them. Then you can find out whether you’ll be issued a pre-approval letter, so you can move forward with your home buying plans.
2). Is a high income all you really need?
In theory, a high income would be enough to get you into an expensive home. However, there’s much more to consider than whether you make a lot of money every year. Another big concern is the level of debt you have. Your debt to income ratio (DTI) is also a vital part of the equation. You need to show that you have enough income to make your house payment, after you pay your other debts and obligations. If you can’t do that, your financial picture isn’t b enough to get you qualified for a jumbo loan.
3). Aren’t there limits on the amount of the loan?
A jumbo home loan is designed for those who want to purchase a more expensive home, and can give you a good deal. There’s no theoretical upper limit on how much you’re borrowing. Lenders will have different rules and regulations, though. If you’re planning on financing a very, very large sum, it’s always best to make a lender aware of that right from the start, so they can give you information on whether they will consider a loan of that size.
4). Won’t I be stuck with the interest rate I get?
Part of purchasing a great house is getting an interest rate you’re happy with. If your rate is too high, you’ll find that your mortgage payments are more than you want them to be. You could be paying thousands more for your house over the life of the loan, and that’s generally never a good thing. Rather than take that chance, check with more than one lender. That will give you more information about interest rates, because they can really vary.
5). I can’t you anywhere, can I?
Jumbo home loans can be used anywhere. There are some regulations for where the higher upper limit of more than $625,500 comes into play for non-conforming loans, so you may not be able to get a jumbo loan for an amount between $417,000 and $625,500 in some parts of the country. You could still get a conforming loan for a house in that price range, though.
6). Won’t I still have a 30-year mortgage?
When you’re buying your home, you’re probably focused on a 30-year mortgage. That’s the standard, and it’s what most people choose. You can get that with a jumbo loan, as well, so you can enjoy the benefits of home ownership and have a mortgage payment that’s reasonable for your income and debt level. You can always pay it off early if you choose to.
7). My debts don’t matter much, right?
Your debts are a big deal because of your DTI. Other than measuring that ratio they don’t really matter, unless they’re not being paid on time. If you have a lot of late payment or other problems with the debt you currently have, you may not be able to get qualified for a jumbo loan. It’s important to take stock of your financial situation before applying for a jumbo loan.
8). Checking my credit report isn’t relevant, right?
Your credit report really matters, and you want to make sure you’re focused on whether it’s in good shape or has some problems. There could also be a mistake on it, which might mean you have a lower credit score than what you actually should. Getting those kinds of mistakes corrected, and doing what you can to mitigate any legitimate credit problems, can help you get qualified for your jumbo loan.
9). What happens if you’re self-employed?
Self-employed people traditionally have a harder time getting qualified for any kind of mortgage loan, and jumbo loans are no different. Some lenders may not be able to help you. Those that can will need to see at least two years of tax returns, and will also want to see banking and other information. Be prepared to provide a lot of financial documents if you’re self-employed and trying for a jumbo loan. That doesn’t mean you can’t get one if you’re qualified, though, so it’s worth working with a lender to find out your options.
2 Point Highlight
IA jumbo home loan is designed for those who want to purchase a more expensive home, and can give you a good deal.
If you’re considering a jumbo loan, you want to talk to your lender and make sure it’s the right choice for you.
