5 FACTS ABOUT JUMBO LOANS
If you are about to buy a home, it’s better to knowledge yourself of what you are getting into. You need to realize that there are serious risks associated with getting a Jumbo loan, and you may need to weigh out your options. When you take out a jumbo loan, you are signing up for […]
If you are about to buy a home, it’s better to knowledge yourself of what you are getting into. You need to realize that there are serious risks associated with getting a Jumbo loan, and you may need to weigh out your options.
When you take out a jumbo loan, you are signing up for more debt which might be a problem for you in the long run. No person in their right mind would want to take this burden, but with people wanting to live in mansions, you might want to read these five facts about Jumbo Loans if you are one of these people.
NO CONFORMING MORTGAGES:
Normally, when we talk about a typical mortgage, the loan is sold on the secondary market to mortgage investors, the biggest of which are Freddie Mac and Fannie Mae (Both government sponsored entities)
When smaller mortgages adhere to the standard of these entities, they are conforming; when they do not, they are considered “non-conforming”. This is where jumbo loans come into play. Jumbo loans are too big to meet these standards and are therefore considered “non-conforming.”
JUMBO LOANS ARE MEANT FOR SOMEONE MAKING A SERIOUS INVESTMENT:
If you are considering a Jumbo Loan, you are looking to buy a home because of the serious risk poised within the loan. If you are buying a car, jumbo loans aren’t for you. Trust me, it’s not a good idea.
The amount of money for the mortgage all depends on how expensive the home is. If it’s a less expensive home, then the loan amount will be relatively small and vice versa.
In most U.S counties, the loan limit is $424,100, but in areas where houses are in high demand, these limits can be much higher. For example, let’s look at San Francisco, a place where home prices have skyrocketed. Here, the loan limit can be as high as $625,000. So,it all depends on where you want to buy your house. Once you decideon the dream home you want, you can use the FHFA website to find out what the loan limit is.
THEY USUALLY REQUIRE YOU TO PUT DOWN A MASSIVE DOWN PAYMENT:
If you want to live in a bigger home, you’ll need to be ready to throw down a huge down payment, as many lenders want to reduce the risk on their end. Most lenders will make you pay a 20% down payment on the spot, or even more in some circumstances, or they might require six to twelve months of mortgage payments in an asset account as an extra measure of security.
MASSIVE AMOUNTS OF PAPERWORK INVOLVED:
Because of how risky Jumbo Loans tend to be, your lender will most likely require you to show more paperwork to ensure there’s no risk on their end.Here’s an example. Let’s say that a self-employed borrower wants to take out a Jumbo loan, their lender might ask him/her to submit 2-3 years of their tax returns instead of one year. The borrowers want to make sure that you are qualified for the loan because if you are not, there will be consequences for both the borrower and the loaner. If you are trying to get a Jumbo loan, you may have more than one source of income, and as a result you would have to sit through complicated income analysis, which I’m sad to say is very common
WHATS YOUR CREDIT PROFILE LIKE?
Borrowing such a massive amount of money comes with its caveats. Does the lender find you trustworthy? Can you find the time and manage how to handle such a large sum of money? Simply nodding your head and saying head will not be enough I’m afraid. To check if you are trustworthy and can manage your money, lenders will usually look at your credit profile.,
Borrowing you a huge sum of money comes with one major thing, does the lender find you trustworthy? Are you capable of managing such a huge amount? Unfortunately saying yes won’t be enough to this too. The only way to find out if you will be responsible enough with the money is for the lender to check your credit profile.
DOES IT MAKE SENSE?
Is it a good idea to get a Jumbo Loan? It all depends on you and what you need. If you absolutely need a home right now and you don’t have enough money to finance it with a smaller loan, then you should consider getting a Jumbo loan. But remember this, a Jumbo loan comes with serious risks and may lead to you having no money at all. It’s all a matter of perspective and how persistent you are. Ultimately, it’s up to you but take caution when going for a Jumbo loan. However, if you can make all the payments associated with a Jumbo loan, you might as well take the loan and buy that house you’ve always wanted without the fear of missing your mortgage payments.