When you get a mortgage there are some options to consider. One of those options is which kind of mortgage you’re actually going to apply for. Most people choose a conventional loan, but if you’re trying to borrow a large amount of money you may not be able to get that type of mortgage. Instead, you may need a jumbo mortgage, which means that you’ll be borrowing more than $417,000. In some parts of the country where prices are very high, you’ll need to borrow more than $625,500 in order to qualify for a jumbo loan. But what is a jumbo mortgage, really, and how can it help you get the house you need? Will it cost you more in interest and other fees? The more you know about your options, the more informed decision you can make.
1. What does a jumbo mortgage offer?
A jumbo mortgage offers you a way to buy a bigger, more expensive house. Many lenders handle jumbo mortgages, so you’ll be able to find one that works for you. Qualifying is similar to a conventional mortgage, and you’ll be able to get the house you really want. In many cities and states homes are expensive, but if you want to buy a great place and you have the means to do so, you should be able to get a mortgage that will work to meet your needs. Jumbo mortgages can mean reasonable interest rates, and can allow you to buy more than you’d otherwise be able to get. The closings costs are also generally very reasonable, so you won’t have to overpay just to get a house that works for you and that’s right for your family and your needs.
2. Who can get these mortgages?
If you’re thinking about getting a jumbo mortgage, it’s important to know that they aren’t for everyone. Your income has to be high enough to pay the mortgage payment, but there’s more to it than that. You also have to have a debt-to-income ratio (DTI) that’s realistic for the payment you’ll have. If you make a lot of money but have a lot of debt, you may find that you can’t get the jumbo mortgage you want. Since income is only one factor, you’ll need to consider your debts and your credit report before you’ll know whether you can get the mortgage you’re interested in. Talking with a lender can help you get a better picture of what they’re looking for, which will give you a better idea of affordability and other factors you’ll need to consider for your loan.
3. What are the risks?
The biggest risk of a jumbo loan is simply the fact that it’s such a large amount of money. Even with excellent credit and a low DTI, and getting the best interest rate you can, you’ll have a large payment. If you lose your job or have some other kind of financial hardship, you may find that making payments on a jumbo loan is very difficult. Stability is highly important if you’re going to try for a jumbo loan, since you want to feel confident that you can make the payments over the long term. When you have a stable income, you generally feel better about getting a loan of that size. Your lender will feel better, as well, making it more likely that you’ll get the loan you want. Even though a jumbo loan can be risky, it can be an excellent choice for the right borrower.
4. What is the cost of a jumbo mortgage?
Getting a large mortgage for your home comes with costs. Fortunately, these costs aren’t really that much more than what you’d see for a conventional loan. The taxes and insurance may be higher simply because of the value of the home you’re buying, but the closing costs and mortgage origination fees will be similar to what you’d be offered if you were choosing a conventional loan on a lower priced property. That’s important, because it helps you keep your total buying costs as low as possible. You won’t need to worry about paying exorbitant fees just because you want to get a jumbo mortgage on a great property that you really love.
5. Is a jumbo loan right for you?
Whether a jumbo mortgage is right for you depends on several factors, such as the cost of the property you want, your credit, your income, and other considerations. Only you can decide if you want a jumbo loan, and your lender will be able to work with you on the options you have. Qualifying for a jumbo loan may take time, depending on whether you’re close on your DTI and other requirements, or whether you have plenty of income and assets. Some people get jumbo loans even if they can pay cash, because they have their money invested in such a way that their return on it is greater than the interest they would pay on the loan. That works for them, and can be a good choice. Your lender will be able to help you with qualification requirements, so you know exactly what you can borrow and can decide how you want to proceed.
