What is it?
A jumbo mortgage is a loan for a mortgage on a high-priced property that's above the limits of a conventional loan, $417,000 in most parts of the country, but can be as much as $625,000 in higher cost areas. Immediately after the housing crash of 2008, jumbo loans were hard to come by. Since then, banks have made their lending standards for this type of loan stricter and, as a result, interest rates on this type of loan have gone down and they have become more widely available. You don't need a special type of lender for this type of loan, but not every lender offers this type of loan. If you live in a high-cost area and aren't looking at a luxury house, you can also consider an FHA loan, which has a limit of $636,150 if you live in a high-cost area.
Advantages of a jumbo loan
Jumbo loans might be necessary depending on your situation.
- It allows you to buy a home in more expensive parts of the country where $417,000 is closer to the average price.
- It allows you to buy a luxury home
Disadvantages of a jumbo loan
Before you decide make sure you consider:
- You generally have to pay a higher down payment.
- Most lenders require a higher credit score and a lower debt-to-income ratio than they would for other loans.
Is it right for you?
A jumbo loan might be a good option for someone who:
- lives in an area with high real estate values
- has a stable income to make the loan payments
- has the necessary credit and debt-to-income ratio to qualify
- is looking for a luxury home
Time to start making a budget and researching homes and lenders. Wondering what would your mortgage payment be if you got a jumbo loan? Use our mortgage calculator to find out.