Jumbo Loans

What is a Jumbo Loan?

If you want to buy a property in California that costs more than $822,375, you should go for a jumbo loan. Jumbo mortgages are loans that exceed the size limit set by Freddie Mac and Fannie Mae (home mortgage government-sponsored companies).

Jumbo loans are large loans that are not insured at the governmental level. The limit amount of jumbo loans in California varies among countries, also it depends on the market value of the property of that area. The terms, requirements, and implications of tax of jumbo loan slightly vary from a conventional loan.

The federal housing finance agency FHFA changes this conforming limit every year. The jumbo loan, also known as a non-conforming conventional loan, might be risky for lenders because FHFA does not insure this loan. Like the traditional loan, lenders interest rates may differ for a jumbo loan.

What are the Pros and Cons of Taking a Jumbo Loan?

Through the non-conforming mortgage, you can buy investment properties or vacation houses that can be the source of long-term income. Along with this, there are several other pros of a jumbo mortgage. But for taking the maximum benefits, you should know both the bright and dark sides.

Benefits of Jumbo Loans

1. The first and the most eye-catching advantage of this loan is the large money available to you. You can buy a luxury property at a highly competitive location.

2. Borrowers can get the mortgage at the lowest interest rates, and there is flexibility in terms like adjustable-rate and interest-only repayment.

3. The down payment, the payment made by the borrower to obtain a loan, or the upfront payment of the jumbo loan is quite low compared to a conforming mortgage.

Cons of Jumbo Mortgage

1. The high credit score is another big flaw of this type of loan. The minimum credit score to qualify for a non-conventional loan is 700 and is considered the lowest FICO score in the jumbo mortgage market.

2. A borrower landing a jumbo loan should have a high yearly income and not have much debt. In other cases, you may be disqualified.