A jumbo loan is a mortgage that exceeds the conforming loan limit set by the Federal Housing Finance Agency. This limit varies depending on the location of the property but is typically $484,350 or higher. Jumbo loans are available in both fixed-rate and adjustable-rate mortgage options.
For many homebuyers, the main advantage of a jumbo loan is that it allows them to purchase a more expensive property than they would be able to with a standard mortgage. Additionally, jumbo loans often come with lower interest rates than other mortgage products.
However, there are also some potential drawbacks to consider. One is that jumbo loans can be more difficult to qualify for than standard mortgages. Lenders often require borrowers to have strong credit scores and healthy incomes to be approved. Plus, jumbo loans typically have higher closing costs than standard mortgages.
Pros
- Jumbo loans can come as a fixed-rate or as an adjustable-rate.
- There are higher loan limits meaning it allows the borrower to purchase a more expensive property than they would be able to with a standard mortgage.
- The borrower has more flexibility in the type of home. It can be a primary residence, a vacation home, or an investment property.
- There’s typically a higher interest rate
- Borrowers need an excellent credit score (many lenders require 700+)
- Jumbo loans typically have higher closing costs than standard mortgages
- Not all properties qualify for this loan
Who is this ideal for? Jumbo loans can be a good option for prospective homebuyers who want to purchase a high-priced property.
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