What Are Jumbo Loans, And How Can I Qualify For Them?
One of the essential elements of buying a home is recognizing the type of mortgage that fully satisfies your needs. You may want a jumbo loan to buy the house of your dreams.
Here’s an example that can assist you in deciding if a jumbo loan is best for you.
What Is A Jumbo Loan?
A jumbo loan, or jumbo mortgage, is a mortgage loan that surpasses the boundaries set by the Federal Housing Finance Agency (FHFA). Jumbo loans are called non-conforming mortgages because they do not conform to those limits.
Because these jumbo titles don’t have the guarantees that following loans do, borrowers manage to be subject to more significant investigation and may or may not have higher financing costs. A jumbo loan may draw different investors than those who are typically into purchasing conventional mortgage securities.
Why Are Jumbo Mortgages Handled Uniquely?
Here’s how the mortgage industry operates: Mortgages are started by lenders, who quickly trade them to mortgage investors like Fannie Mae or Freddie Mac so that they continue to get loans. But Fannie and Freddie are only allowed to buy mortgages that adhere to the FHFA’s borders.
After buying these mortgages, Fannie and Freddie bundle them collectively, similar loans for sale to investors on the secondary mortgage market. A similar process often happens for jumbo mortgages, but different investors are involved.
What Are The Jumbo Conforming Loan Limits?
Fannie and Freddie placed limits on how big your mortgage can be – they’re designated conforming loan limits. Conforming loan limits differ by state and market. In 2021, you can only borrow up to $548,250 for a single-family unit in most parts of the U.S. However, conforming loan limits go as big as $822,375 in Alaska and Hawaii, where the median price is far above the federal standard. In other high-cost regions, loan limits are placed on a county-by-county foundation.
What If I Can’t Find A House Within The Conforming Limits?
If you want to own a home in some of the most expensive housing markets in the U.S., you’ll probably need a jumbo loan. Don’t worry, though – you’re not alone. With the currently sizzling housing market, many people find that even modest homes require a jumbo mortgage in some areas.
Because of this demand, lenders are becoming more comfortable offering jumbo mortgages. America’s Best Lenders currently offers the Jumbo Smart loan, which provides loans up to $2.5 million, doesn’t charge PMI, and attempts to streamline the volume of paperwork that lenders have traditionally required for amounts above the conforming loan limits.
How Do Jumbo Mortgage Rates Compare To Conforming Loan Rates?
It makes sense that lenders might require higher interest rates on jumbo loans because there’s so much uncertainty involved. However, business data hints that interest rates on jumbo loans are very contentious with market rates.