There are many loan options to consider when you’re about to buy a house. You want to make sure you’re getting what you need from the experience, and that the mortgage you choose is going to be right for the property you’re buying. That’s why it’s so important to understand the difference between jumbo and conforming loan requirements. If you get a conforming loan you’re limited on the price of the house. A jumbo loan doesn’t have that restriction. However, what you qualify for based on your income, credit, and other factors all matters. You may not be able to get the loan you hoped for, and it’s important to know that up front. Your lender can help you make the right choice, but the more you understand ahead of time the easier it will be for you.
1. What is a jumbo loan?
A jumbo loan is for houses costing more than $417,000. In some parts of the country, you can only get a jumbo loan if the house costs more than $625,500, because the home prices there are much more expensive than what would typically be seen. Jumbo loans work very well for people who have the means to buy more expensive houses. They are also good choices for investors or others who have a lot of cash or other assets working for them, and don’t want to liquidate assets to buy a property. In those kinds of cases, you’re probably making more on your money where it is than you would pay in interest on the loan. That can make a jumbo loan a smart business move for the right person, but it’s not a good choice for everyone.
2. How is it different from a conforming loan?
By getting the right loan, you’ll have peace of mind. A jumbo loan may not be right for you, in which case you’ll want to look into a conforming loan. That’s what most people consider a typical mortgage, and as long as the house you want to buy is priced below the cut-off amount for a standard loan, a conforming loan will work for you. Naturally there are other factors at play when it comes to whether you can qualify for the loan, but the only real difference between jumbo and conforming loans is the price of the house you’re trying to purchase.
3. How do you know if a jumbo loan is right for your needs?
Your lender can help you determine if a jumbo mortgage is right for you. Before you talk to them, though, there are some things you can consider. The price of the home you intend to buy is the most important factor. Also think about your income and assets, and whether you have money that’s working well for you where it currently is. If you don’t want to lose that value, it may be better for you to get a jumbo loan even if you have the means to pay for the house instead. That way you don’t lose the good rate of return you have on your money. As long as you can get an interest rate on your jumbo loan that’s low enough, you’ll come out ahead.
4. How do you get a jumbo loan?
You can get a jumbo loan from many different lenders. Some lenders choose not to offer jumbo loans because of the outlay of cash that comes with financing a home that expensive. Smaller lenders and local banks may be less likely to provide you with a jumbo mortgage, and you may have better luck with larger banks that can provide you with bigger, better loan options. That doesn’t mean you shouldn’t ask around, but only that you may be more limited on a jumbo loan than you would be on a conforming loan when it comes to options for lenders.
5. What are the risks to a jumbo loan?
Part of making the right loan choice is knowing the risks of the loan you’re choosing. A jumbo loan has the same types of risks that a conforming loan would have. The biggest risk, really, is that the loan is much larger. Because of that, the payments are bigger and there’s more at stake. However, there aren’t additional risks that specifically come with a jumbo loan, since they’re processed in much the same way as smaller, conforming loans. If your income is b and you can qualify for the loan, you can buy the home you want.
6. How do you get a conforming loan?
Getting a conforming loan is as easy as going to almost any lender. There will be qualifications you have to meet, and some lenders may be more lenient than others. Your credit should be as good as possible, and you’ll want to make sure your income is b and stable. Your debts should be low, too, so your debt-to-income ratio (DTI) isn’t too high to stop you from getting the loan. As long as you meet the lender’s requirements and the house appraises at or above the purchase price, you can get a conforming loan.
7. What kinds of risks do conforming loans have?
The biggest risk of a conforming loan is that you’re buying a very large asset with it. If you can’t make the payments or you experience other types of financial problems, you could find that you’re at risk for losing your house. That’s a serious problem, but it’s the risk you take when you buy property with a mortgage. Being financially prepared and settled before you get a mortgage can help you reduce your risk.
