What is a jumbo loan?

Jumbo loans are used to finance homes with loans exceeding the loan limits set by government sponsored entities (GSEs). It is suitable for borrowers who want to buy luxury homes or refinance existing large mortgages. Jumbo loans allow you to have larger loans at a lower rate because it does not conform to the requirements set by Fannie Mae and Freddie Mac.

Who qualifies?

Qualifying for a jumbo loan is similar to qualifying for a conforming loan. Lenders take monthly income, monthly expenses, excess cash, and credit scores into account when deciding if a borrower qualifies.

Generally if your credit score sits at 700 or higher and you have 6 to 12 months in reserve, you will fit the requirements to qualify for a jumbo loan. For individuals looking to take out a jumbo loan, proof of a substantial income will also be necessary.

Benefits/tips

For real estate in more expensive markets, like New York City, Los Angeles, and San Francisco (and for more expensive homes in Southern California), taking out a jumbo loan will assist in paying for these pricier properties. These loans also allow for more flexible loan terms, allowing the borrower to adjust the amount of time on the fixed-rate loan or change the mortgage to be adjustable rate. It also helps you to borrow the full amount of money from one loan instead of having to break it up into two different loans for buying a higher-priced home.

One thing to keep in mind: these loans will naturally come with higher interest rates. To qualify, a good credit history is essential, so double check all credit reports for any potential inaccuracies. In general, being accepted for a jumbo loan is difficult, so you must also be able to prove that your income is high enough to be able to afford monthly mortgage payments.

It is also recommended to avoid investing in any other properties in Southern California if you have any lingering debt — be it from remaining college loans or medical bills — or you can anticipate a large expense coming quickly. Lenders want to know that you have the funds to pay off the loan, and that you will continue to do so for the years on the loan.

Feel free to Contact The Forester Team today for any inquiries about jumbo loans!

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