Understanding Jumbo Loans

When You Can’t Get a Conforming Loan, You Get a Jumbo Loan

Imagine you’ve found the house of your dreams.

After years of work, maybe even decades, you’re ready for this place that you love. Maybe it’s in an expensive area of town, or maybe it’s particularly big. Whatever the reason, you’ve found a home — an expensive home — and you want to live in it.

If you have a healthy six-figure income, you may assume that it’s easy to get a mortgage for the expensive home.

You have the income to pay it off, so you should be in the clear, right? Not quite.

Once a mortgage reaches a certain price, it’s no longer considered a “conforming loan.”

If you want to take out  a mortgage for a particularly expensive piece of real estate, you’re going to need to get a jumbo loan.

What’s a Jumbo Loan? What’s a Conforming Loan?

A conforming loan is essentially a loan that meets the standards set by Fannie Mae and Freddie Mac. These loans are considered lower risk.

As of this posting, the conforming loan limit for the vast majority of loans in the US is $417,000. The only states where this changes are Alaska and Hawaii. In these states, the limits are higher.

When your loan needs to be bigger than the limit set by Fannie Mae and Freddie Mac, your loan becomes a jumbo loan.

The Advantages and Disadvantages of a Jumbo Loan

The advantage of a jumbo loan is obvious: you get the money you need to buy a very expensive house.

However, lenders are risking more on a jumbo mortgage. Because the property is so expensive, it is more difficult to just turn around and sell it quickly at full price. There just aren’t enough customers to make luxury real estate transactions both quick and lucrative.

For these reasons, jumbo loan lenders are most likely going to want to see a higher down payment put on the home. They may also ask for a higher interest rate.

There Are Other Types of Non-Conforming Loans

Jumbo loans are the most commonly-known type of non-conforming loan, but they aren’t the only type. You may also need a non-conforming loan if you want a mortgage with a higher loan-to-value ratio than is standard, or if your credit score is low.

Call the Expert on Jumbo Loans: Emmanuel St. Germain

Want to figure out if your loan is conforming? Are you looking for someone to help you with your jumbo loan? If so, please call Emmanuel St. Germain at 561-362-8204. If it’s not during business hours, he can also be reached at 561-400-7317. He’s here to help you get the mortgage you need.