If you thought that a jumbo loan and a conventional loan are similar type loans you are correct, almost. The major difference is Jumbo loans exceed the conforming maximum loan limit that conventional loans adhere to. In other words, if you want to buy a home with a mortgage loan greater than $647,200, it is considered a jumbo loan.
4 Things You Should Know About Jumbo Loans
- Lenders Are More Selective in Jumbo Loans. You might be accustomed to going to your local bank to get the mortgage loan to complete the purchase of your dream home, but when it comes to getting a jumbo mortgage loan, it will not be as simple as that. In addition to the usual concerns and qualifiers of a conventional loan, lenders look at layered risk when it comes to Jumbo Mortgage Loans. What is layered risk? All the factors that make up the financial picture of a Jumbo borrower. Big wage earners or self-employed borrowers can quickly encounter life changing financial situations that severely and adversely affect a jumbo borrower more so than a conventional borrower. For example, Borrower works for Big Company Incorporated earning Big paychecks. One day the company moves its headquarters overseas. It isn’t always easy for a borrower to up and move or replace that Big Company Paycheck. This can sometimes mean Big Trouble for the Jumbo Mortgage lender.
- Jumbo Loans Require More Money Down. A conventional loan requires not more than 20% down, but jumbo loans will require you to contribute 20% or more to the down payment. This ensures that you can afford the loan and pay it in the long run.
- Jumbo Loans When The Buyer Is An Investor. Jumbo loans can be more challenging when the buyer is an investor. Jumbo loans are made for the owner-occupied homes, so an investor will often encounter more strict underwriting guidelines to ensure a rewarding outcome for the lender.
- Jumbo Loans Require A Good Credit Score. Jumbo loans carry higher interest rates making qualifying even more difficult for the Jumbo borrower than a conventional borrower Usually, you will need at least a score of 700 to be eligible for a jumbo loan. That’s already much higher than conventional loans.
We’re Here for You in Michigan and Beyond!
As you can see, jumbo loans can be a bit more expensive compared to conventional loans. However, they are your best bet when it comes to purchasing high-priced homes. Just be sure to check whether or not you actually qualify for one, and also be sure to work with reputable lenders to access excellent Jumbo Loan terms and conditions. This way, you can maximize savings while still getting access to the financial support you need to pay for your home of your dreams.
MMS Mortgage Services is a licensed mortgage lender in Michigan and 15 other states offering various loans to meet mortgage needs. If you are buying a home and require a jumbo loan to do so, get yours from Member Mortgage Services today! Contact us at (248) 788-0800 to schedule a consultation.
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