Your Ultimate Guide to Jumbo Loans

Posted on January 13, 2019 · Posted in Home Improvement, Landscaping

So you want to buy a new house, but the amount you need to loan is already above the limit of traditional loans, so what can you do? Do you give up on your dream house?

Lucky for you, there is a way. Jumbo loans in Texas are mostly for the home buyers who have a good financial status and prefer to get a loan. If you are planning on purchasing a house, you can know more about jumbo loans here and then decide whether it is for you.

Defining Jumbo Loans

Jumbo loans are a type of non-conforming mortgage that’s usually used to help buyers purchase homes with a higher price. The potential buyers need to have a strong financial position to get a jumbo loan. What does that mean? It means that you should have a low debt-to-income ratio, high credit score and a lot of cash reserves to be considered and to secure a jumbo loan.

Also Read: Jumbo Loans For Beginners

Non-Conforming Loans

Jumbo mortgages are considered to be non-conforming because the amount of the loan exceeds the conforming mortgage limits which are up to Fannie Mae and Freddie Mac standards.

Last 2018, the set limit for conforming loans is at generally at $453,100. In areas with a high cost of living, this limit can go up to $721,000. So the limit mostly depends on where you are residing. If the amount of loan you need is higher than these, then you have non-conforming loans or jumbo mortgages to as an option.

Jumbo loans are typically more massive which means that you should be prepared to take on a larger financial burden compared to traditional loans. The two government-chartered lenders, Freddie Mac, and Fannie Mae don’t handle these mortgages. As such, the loan will only be kept in the books of the lender or transferred to another entity.

Choose the Right Lender

For jumbo loans, expect that the lenders will be setting their guidelines. As such, there will be varying eligibility requirements among the lenders so make sure you choose your lender wisely. Get as much information from them as possible so you can understand the underwriting procedures and specific requirements for the jumbo loans.

So Is Jumbo Loans Right For You?

Jumbo loans mostly favor high-income earners who have a lot of assets and good credit. Because of the loan amount, and the lack of insurance from the government, most lenders, will assume greater risk for these type of mortgages.

If you are planning on getting a jumbo mortgage, here’s a bit of a simple guideline to help you decide.

  • You want to buy higher-priced houses.
  • You have healthy and strong finances.
  • You are ready to take a step towards a long-term, substantial financial commitment.

If you find that you can’t take on a jumbo loan, there are alternatives. It might be better to have a different approach. Here are some suggestions:

  • Use a combination of smaller loans – piggyback loans.
  • Verify if you need a jumbo mortgage. If you are in a high-cost area, you might find that the loan limit in your place is enough to buy a house.

Bring your loan amount with a larger down payment.