What is the Difference between a Jumbo Loan and Traditional Financing?
Filed under: Mortgage News
If you are working to secure financing to buy a home, then you need to be familiar with the different types of loans that are offered. Some people are scared of the term “jumbo loan” because they don’t understand what it means. Even though the name might sound a little intimidating, there are many similarities to conventional financing. Here are a few things that you need to know about jumbo loans:
Fannie Mae and Freddie Mac Limits
There are restrictions on the amount of money that can be borrowed based on the rules set by Fannie Mae and Freddie Mac. When you are working with a mortgage lender, they will let you know the high balance limits for the location where you live.
When your loan falls below these limits, then you will have standard rules to manage the loan. But, there are some situations where people need to borrow a higher amount, exceeding the limits set by Fannie Mae and Freddie Mac. In these instances, you can work directly with a lender who offers jumbo loans. Each lender will have their own guidelines, so it is a good idea to shop around to find the best deal.
Interesting Facts about Jumbo Loans
As you learn more about jumbo loans, you will see that they can be an effective financing solution when needed. Here are a few interesting facts to help you understand how jumbo loans are different from traditional financing:
- Your credit score will need to be high to qualify for a jumbo loan
- Down payments can be anywhere from 5% – 20%
- Most people don’t put the full 20% down on a jumbo loan
- Choosing a lower down payment might require mortgage insurance
- Interest rates for jumbo loans are usually comparable to conventional lending
Are you trying to decide on the type of loan that will be best for your home purchase? Then, you need to talk to an experienced mortgage team. As you learn more about financing options, you will be able to compare the pros and cons of jumbo loans.
Call Bill Provost at Franklin Loan Center for more information about how you can secure the right financing for your needs: (760) 282-4415
