What is a Jumbo Loan?
Just as the name suggests, jumbo loans are extremely large home loans.
There may an increase in the limits, but right now, any home loan above $417,000 qualifies. In Hawaii, Guam and Alaska and the Virgin Islands the amount goes up to $625,000.
Traditional home loans and jumbo loans are similar, except for the fact that jumbo mortgages are more difficult to get. In certain states many people rely on these types of loans. If you fall into this category, it is advisable that you know what the pros and cons are.
When you need the money, jumbo loans provide you with the cash and this is one of the most important advantages of this type of loan. Most people need financial assistance when it comes to buying a home.
Jumbo loans simplify the home buying process due to the fact that you only require one loan, not two or more. In past years, many people had no choice and had to find two lenders.
There are a number of different jumbo loans to choose from. Like with traditional loans, jumbo mortgages offer different adjustable-rate loans and fixed-rate loans.
The interest rates for these type of loans is dropping and is currently at a record low, making it easy for people to refinance.
It is much easier to apply for a jumbo loan and this is mainly due to the fact that there is more competition now than there was in past years. Applying for a jumbo mortgage is not easy, but it is much easier than it was n previous years.
People who have refinanced a jumbo loan can save a lot more on a monthly basis with regards to repayments. The savings can be used for living expenses, paying off credit card debt, or placed into a investment or savings account.
People who are choosing the jumbo loan route are getting very attractive offers. Many banks offer reduced fees, faster processing and even medical insurance. The lending companies are doing this because of the high interest payments they will be receiving through the course of the loan.
There are some very clear advantages, but there are also disadvantages that you need to be aware of.
Jumbo loans have higher interest rates. Regardless of how good a credit score you have, you will always end up paying higher rates for this type of loan. It is this way because banks are taking a higher risk by lending you more money. In general the interest rate is about .5% higher than a regular loan.
getting a jumbo loan is more difficult than getting a regular loan. Buyers will need to prove that they have a lot of assets and enough income to repay this type of loan. Due to the fact that the repayment amount will be much higher than a traditional loan, buyers will need to prove to underwriters that they are in a financial position to take and repay the loan. they will also need to have a very good credit score/rating. The credit requirements differ from institution to institution.
The main thing to remember regarding jumbo loans is that you need to be fully prepared for what you are about to take on. Do your research before applying.