What Is A Jumbo Loan?
At first glance, the term “jumbo loan” can be intimidating. However, in reality it simply refers to loans above a certain monetary limit. If you’re thinking of buying a larger home than the one or you’re opting for a high-end property, you might want to consider opting for a jumbo loan to help you get there. Basically, a Jumbo loan is any mortgage which is above the maximum loan limit set by Freddie Mac and Fannie Mae, the two biggest government-sponsored mortgage buyers. Here’s a closer look at what buyers need to know about jumbo loans.
What is a Jumbo Loan?
The limits on jumbo loans are set based on the median income guidelines for specific areas. The limit is $417,000 in 3,108 counties in the United States, whereas it is approximately $625,500 in 100 counties with higher incomes and costs of living. There are 92 counties in the United States where a jumbo loan limit falls between $417,000 and $625,500. In Nevada, the limit is $417,000, with Nevada Super Jumbo loans beginning at one million dollars.
How Can You Qualify for a Jumbo Loan?
Since jumbo loans are typically larger than the average mortgage, credit scores are incredibly important. Some experts suggest that credit scores for a jumbo loan are a minimum of 700; higher is even better. Income levels and low debt-to-income ratios are also critical. The maximum debt-to-income ratio for a jumbo loan is 45%.
Individuals who are looking into obtaining a jumbo loan have to show that they can make bigger payments every month and prove that they have the resources (and ongoing stability) to manage those payments. Since PMI doesn’t exist for loans this large, buyers must be able to put down an appropriately large down payment. One additional factor to note is that banks often have requirements for financial reserves set aside for the mortgage, to keep available to the buyers after the closing. On a conventional mortgage, it may be only one or two months’ worth of cash. For jumbo loans, reserves often need to be equivalent to 20% or up to six months of payments, depending on the lender.
For buyers with great credit, healthy incomes, and a strong overall financial picture, a jumbo loan can be the right choice to help you reach your real estate goals. Interest rates are currently excellent, and interest on loans up to $1 million may be tax deductible.
Are you a Las Vegas resident interested in getting a jumbo loan or mortgage on a higher ticket property? Contact Sydnee Johnson today to arrange for a consultation to discuss your options.