Benefits of Jumbo Loans: Why You Should Get a Jumbo Loan

Jan 09

For the people in strong financial positions, a mortgage can be different than what most people know. Well, if you are looking for a beautiful home but more expensive than most, you will usually need to have a larger mortgage loan.

Also, conventional loans have certain limits which can make it a bit more challenging to get a mortgage. Here is where jumbo loans come in. But what are jumbo loans? What is a jumbo loan in Texas?

As you may have guessed, jumbo loans offer a borrower a more massive amount of money than what is usually available. Aside from that, there are a lot of other things that make jumbo loans different than what most people know.

Basics of Jumbo Loans

Depending on the area where you reside, there are several loan limits where you will fall under referred to as the conforming loan limit. Generally, this is the highest amount of money that a person can have from a single loan. The range for this is usually at $400,000 to $650,000 most often.

When lenders provide loans that far exceed these limits, there are some trade-offs. First of all, mortgage rates are often higher because of the risk is taken by the lender. Because jumbo loans are way above the loan limit set by Fannie Mae and Freddie Mac, lenders are not insured.

As a result, lenders will ask for a higher credit score and a lower debt-to-income ratio compared to the traditional loans.

Benefits of Jumbo Loans

For every borrower, the most significant advantage you can have is that you will have the money needed for a large house purchase. In other places, real estate is expensive compared to others. As such, you might need to borrow a large amount of money if you want to purchase a house.

Also Read: Down Payments: How They Work, How Much to Pay

This loan allows you to borrow money from only one loan instead of taking from two loans. It allows you to avoid using your own money and savings to buy your dream house. Without jumbo loans, you might need to save a lot of cash and use it to pay for the house. This can be hard and result in you using all of your money.

Another advantage of this is that you can choose from a lot of different loan programs. An example is a 30-year fixed-rate loan, or you can get yourself a mortgage that has an adjustable rate thus allowing you flexibility when it comes to the terms of the loan.

As good as jumbo loans are, expect that you have to show the lenders your credit history as well as provide them with a lot of documentation. They will require you to have some cash reserve that’s enough to pay 6 to 12 months monthly payment at least. These ensure the lender that you, as a borrower, can do your part and pay for your loans.

All in all, finding for the right loan can be hard but know that you have a lot of options depending on the house you want to buy and your financial status.