If you’ve started researching the home buying process, you’ve probably at least encountered the term jumbo mortgage. But what is a jumbo mortgage loan? While many people might assume you only need one when buying a “jumbo” house, but that’s not always the case. Here’s the skinny on the jumbo loan.
Definition of jumbo mortgage loan
Put simply, a jumbo home mortgage loan is a home loan for amount above the limits set in government-sponsored loans. In most of the US that limit is $417,000, but in areas with higher cost of living the limit is $625,500. High cost areas include major cities like NY, San Francisco, Washington DC, etc.
What makes a jumbo different?
These loans are not typically backed by Freddie Mac and Fanny Mae. That means they are offered by local and national banks. Because of this, they are often considered a riskier loan than conventional mortgages.
In the past, these loans carried much higher interest rates than conventional ones. However, in recent years that is no longer the case. Lenders have become quite competitive on these loans. There are more options for jumbo mortgage loans now than in the past.
Typically these loans have stricter eligibility requirements. In other words, your credit will need to be near perfect and you’ll need plenty of cash reserves to qualify. As always, we suggest working with an experienced mortgage broker to help determine this kind of loan is right for you!
Want a reference for who to work with regarding jumbo mortgages? Call DeSelms Real Estate today at 615.550.5565 to see who we recommend!
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