What's a Jumbo Loan?
There are cases whereby a conventional loan is simply not going to be sufficient to finance a property, but what's a jumbo loan? Instead, you need something more significant, which is where a jumbo comes in. A jumbo is a type of mortgage that is used for financing properties that are higher than a typical conforming loan.
In most areas, you cannot take out more than one that is larger than a traditional conforming loan. This is determined by the FHFA, which is the Federal Housing Finance Agency. If you want to buy a property that costs more than this, and you do not have the money available to bridge the gap, you will need a jumbo loan.
Differences between a Jumbo and a Conforming Loan
There are some key differences between the two. With jumbo loans, you can typically expect higher closing fees and costs and heftier down payment. Interest rates are often higher as well but it all depends on the lender you choose for your jumbo mortgage.
Qualifying for a Jumbo Loan
There are a number of different factors that will be considered to determine whether or not you apply for a jumbo loan. This includes cash reserves, debt-to-income ratio, and your credit score. You will also need to supply some documentation during the application process.