Determining the best option for financing can be a long process if you are unsure of the available options or just new to the process. There are some options that are more popular than others so they are more well-known but one of the lesser known options are jumbo loans.
A jumbo loan is a type of loan used to purchase a home when the limits of government-backed loans, aren’t enough to cover the cost. There is a limit on mortgages which is set by Fannie Mae and Freddie Mac, when those limits are exceeded, you will find yourself in need of a jumbo loan. These are called non-conforming loans and the maximum varies by lender, so it is important to weigh out your options and talk to different lenders.
How Do I Qualify?
The qualifications will vary depending on the type of loan and lender, but jumbo loans typically have more stringent requirements. Your finances will be reviewed fairly closely as these loans have a strict underwriting process, so it is not advised to apply for this type of loan unless you are in a stable financial position.
The reason these loans have more guidelines is that they involve more risk than a government-backed loan. Although they do have more to gain since the loan itself is higher and can be more profitable to the lender.
In order to qualify for a jumbo loan, you will need to have a larger income, high credit score, and a generous down payment and savings. You’ll need to be able to prove you have enough money to pay off the monthly payments for the first 6-12 months when applying for a jumbo loan as well. If you do not meet these requirements, you can always discuss your options and the specific situation with a lender directly as having a low debt to income ratio can outweigh or lower credit score.
Should I Apply?
Jumbo loans are not right for every situation but they can be the perfect choice if you are in a situation where a loan backed by Fannie and Freddie are outside of the terms that you need for your purchase. It is possible to get a decent interest rate and finance your home even if have a budget that exceeds those limits. Jumbo loans are also good if you are seeking to purchase a piece of land as land and build on it later. That way you don’t have to take out more than one loan for the same project.
Reach Out Today!
If you’re in the market to purchase a property and haven’t secured financing, a jumbo loan might just be the best choice for you. We want to make sure you are making the best decision for your next purchase, so please contact KC Investor Funding today!