Jumbo home mortgage loans are a type of mortgage that can be used to finance the purchase of a property when the cost is too high for a traditional mortgage. While these loans can help you purchase the home of your dreams, they should not be sought without careful preparation. If you're considering a jumbo home loan, be sure to talk to a qualified mortgage lender to discuss your specific situation and determine if a jumbo loan is right for you. Take a look at a few things to consider about jumbo home mortgage financing below.
Your credit score
You can expect jumbo loans to come with stricter credit requirements than conventional loans, so you'll need a good credit score to qualify. A credit score of around 700 or higher is generally considered good, but you may be able to qualify with a lower score if you have other factors in your favor, such as a large down payment.
Your down payment
Jumbo loans typically require a larger down payment, so you'll need to save up a significant amount of money. If you can't afford a large down payment, you may be able to get a jumbo loan with a smaller down payment, but you'll likely have to pay private mortgage insurance (PMI). PMI is an extra fee that protects the lender in case you default on your loan.
Your debt-to-income ratio
Jumbo loans also have stricter debt-to-income ratio requirements than conventional loans. This means that your monthly mortgage payment, along with other debt payments, should not exceed a certain percentage of your gross monthly income. To calculate your debt-to-income ratio, add up your monthly mortgage payment, car payment, student loan payment, and other debt payments, and then divide that number by your gross monthly income.
The interest rate
A jumbo home mortgage loan typically has higher interest rates than conventional loans. This is because they are considered to be riskier for lenders. The interest rate you'll get on a jumbo loan will depend on a number of factors, including your credit score, down payment, and debt-to-income ratio.
The closing costs
Expect higher closing costs than conventional loans with a jumbo loan because they are more complex to process. Closing costs are fees that are paid at the closing of the loan, and they can include things like appraisal fees, title insurance, and origination fees.
The term of the loan
Remember, jumbo home mortgage loans typically have shorter terms than conventional loans. This means that you'll have to pay off your loan sooner if you do choose a jumbo mortgage option.
To learn more about home loans, contact a loan and financing service in your area.Share