Mortgages are a hot topic in the media today. The latest housing crisis has provided plenty of topics for conversation. One that is becoming increasingly popular due to lower mortgage rates is jumbo mortgage loans. Understanding the difference between jumbo loans and conventional loans will help you be a more informed consumer. If you are in the housing market, you will want to know if you qualify for a jumbo loan before finding the home of your dreams.
A jumbo mortgage loan is a loan that is between the amounts of $417,000 and $3,000,000. Any loan that is over $417,000 exceeds the limits of any conventional program, including Fannie Mae and Freddie Mac. Borrowers need to find a reputable mortgage banking firm that specializes in jumbo mortgages in order to ensure a successful purchase without any problems down the road.
It can be difficult to find a mortgage today. The guidelines have gotten much stricter and banks are more hesitant to hand out loans to a large number of borrowers. Because the guidelines are so strict, you need to be informed about what is required of jumbo mortgage loans. Typically lenders require a down payment of at least 20 percent to qualify for a jumbo loan. They also require documented income and for your debt-to-income ratio for your mortgage payment to be no more than 38 percent of your monthly income.
It is more common for banks to keep larger mortgages in-house rather than sell them off to an investor. This allows the banks to set their own guidelines for the jumbo loans that they offer to consumers. Each bank has different requirements, which means if one bank turns you down another might not. If you feel that your financial picture – including your credit, income and assets – should qualify you for a jumbo loan, it pays to shop around.
Jumbo mortgage loans are offered as fixed rate loans as well as adjustable rate mortgages (ARM). A jumbo fixed rate loan is less common than an ARM. This makes it necessary for borrowers to think about the long term. Since an adjustable rate loan increases your rate over time, you need to make sure you will be able to afford the new payment in the future. Finding a banker who you trust to give you the proper advice will be your best defense in obtaining a mortgage.