What is a Jumbo Loan? Also called Super Jumbo, it is a home loan that exceeds conventional conforming loan limits set by the Federal Housing Finance Agency (FHFA) for government-sponsored mortgage groups, Freddie Mac and Fannie Mae. The conforming loan limits differ based on where the home being financed as well as the type of Jumbo loan.
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These are home loans used to finance properties that exceed the amount set annually for conventional conforming loan limits.
Also called non-conforming conventional loans, these loans are considered riskier for lenders because these loans can’t be guaranteed by Fannie and Freddie, meaning the lender is not protected from losses if a borrower defaults. They are typically available with either a fixed interest rate or an adjustable rate, and they come with a few different conditions.
These are loans that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac. The limit changes annually, usually upwards, and is a great resource for determining the area median income and loan limits in your area.
Fannie Mae and Freddie Mac with the FHFA set confirming loan limits, and high balance loan limits for high-cost areas that determine the maximum loan amount someone can qualify for without having to be a Jumbo Loan.
The limits apply to one to four-unit properties. You can buy up to four units in a multi-family property without needing a commercial real estate loan. Above four units, it is typically classified as a commercial real estate.
They typically have more stringent requirements given the increased risk associated with getting a larger loan. Each lender can potentially have additional requirements or parameters, referred to as overlays, in order to qualify.
One of these is typically a larger down payment, usually 20%, however, we have programs that offer as little as 5% down payment. It is worth noting that less than twenty percent down usually affects your interest rate.
One exception to the rule: You can get a Jumbo VA Loan with no down payment for a primary residence. All the standard VA loan requirements apply. You have to be an eligible active-duty service member, veteran, or surviving spouse.
You will also likely be required to have reserve funds in addition to your total cash to close. Each lender can be slightly different in their requirements, however it is typically 6 to 12 months of your total payment with HOA. There are various funds such as retirement and investment accounts that may be eligible to satisfy this requirement. Contact us for more details.
Sometimes jumbo interest rates may be lower than a conventional interest rate even thought lenders generally have a higher risk. It really depends on the current market conditions and market trends.
Each lender can have unique requirements when it comes to Jumbo Loans to minimize risk of default, rates, down payment, DTI ratio (debt-to-income) limits, credit scores, etc. can affect qualification, rates, and terms. These overlays, as they are referred to, are put in place based on the different lenders risk appetite and can be a bit like putting together a puzzle to see which ones fit your specific situation. For this reason, it is important to work with a mortgage expert that can think outside the box to accomplish your objectives.
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