A jumbo loan is a type of mortgage that allows a buyer to purchase a home with an amount exceeding the limits of a conventional (conforming) loan. This is usually an amount greater than $548k. Though that limit varies by location. These are also known as “non-conforming conventional mortgages”.
Some important factors:
- May require a credit score of 720 or more
- You’ll need a low debt to income ratio
- Detailed financial documents are required
- Cash reserves in the bank are highly recommended to increase approval odds
A Jumbo Loan Is Much Stricter
Aside from the important factors listed above, jumbo loans can also require a second appraisal for the purchase property. These loan types are considered risker for mortgage lenders. In this, they can also have higher interest rates and higher closing costs, alongside greater fees.
Why get a jumbo loan?
It covers the need for more loan money to purchase a high-quality property. They can have competitive interest rates for well-qualified buyers and may have lower downpayment requirements vs a conventional loan. Loan terms are flexible; term length, fixed-rate or adjustable-rate, etc.