For some people, the thought of buying a dream luxury home is just that… a dream. However, jumbo loans can make those dreams a reality. Although not as common as before, these loans can make the process of applying for a mortgage much easier. They are available in some banks and financial lending institutions, and they can help you make your dream home more accessible.
That said, many myths surround jumbo loans and discourage people from applying. If you are interested in getting this type of loan but are unsure about it, let us go over some of these myths to help you make a better-informed decision.
What Is a Jumbo Loan?
A jumbo loan or jumbo mortgage is a type of financing that allows a person to borrow more than the loan limit set by the Federal Housing Finance Agency (FHFA). This loan cannot be guaranteed, purchased, or securitized by Fannie Mae or Freddie Mac. Jumbo loan applicants will undergo more rigorous credit requirements than people applying for a conventional loan.
Loan limits change every year so call Steelman Mortgages at 916-847-7263 for the most recent loan limits.
The Myths and the Truths About Jumbo Loan
- Jumbo Loan Will Have an Extremely High-Interest Rate. Jumbo loans can have a higher or lower interest rate than conventional loans. However, it depends on market conditions at the time that you need a jumbo mortgage so you need to check with the current market to know what the current rates are. Jumbo loans are often advertised with adjustable fixed rates for a particular period—mostly between the first three to five years of the loan. After this fixed period, the rate will depend on the index connected to the loan.
- You Can Only Use Your Loan for a Single-Family Luxury Property Type. This isn’t true since you can use a jumbo loan to purchase a primary, second or investment property. There are some differences between the property mortgage guidelines for a jumbo loan applicant versus the conventional home loan applicant. These differences can include the down payment required and the debt to income ratio requirement amongst others. You can apply for a jumbo loan on all types of homes.
Some of the other different requirements are:
- A high credit scores
- Sufficient to high income to have a lower debt to income ratio
- Enough savings and investments to cover the cash to close and reserves
- You Need to Have Private Mortgage Insurance Before Your Jumbo Loan Gets Approved. Government mortgages require specific requirements, such as private mortgage insurance, from those who cannot provide at least a 20-percent down payment. For jumbo mortgages private mortgage insurance is not available so an applicant can have 10% down and then carry a 1st jumbo mortgage at 80% loan to appraised value and then a second smaller mortgage at 10% loan to appraised value to leave just 10% needed for the down payment. A jumbo loan requires 20% down so by doing a second 10% and having 10% cash down the applicant covers the 20% requirement.
- You Cannot Get Loan Approval Without a Huge Down payment. A down payment is still a necessity for any loan type, including a jumbo mortgage. However, since a considerable amount of money is involved with jumbo loans, that means the 20 percent required down payment will also be an large amount. The great news is an applicant can get an 80% loan to appraised value 1st mortgage and a 10% loan to appraised value 2nd mortgage and then only need 10% of their own cash.
Jumbo Loan with Steelman Mortgages
A lot has changed since the introduction of the jumbo mortgage. These changes include making the option of applying for a bigger loan possible with less trouble. Lenders have also adjusted their setups so that more people like you can make their dream homes a reality. Are you a first-time homebuyer in Roseville looking for a mortgage broker to help you purchase your luxury home? At Steelman Mortgages, we can make the mortgage process smooth, simple, and pleasant. Call us at (916) 847-7263 now to learn how we can help you.
