Even though the requirements are more rigorous than standard loans, a jumbo loan is a perfectly viable way to purchase a home.
If you’re interested in buying a very large home in St. Louis, or you’re purchasing a home in a historic district or very upscale neighborhood, you may have heard of “jumbo loans,” and you might be wondering if it’s a good idea to buy your home with a jumbo loan. In this guide, we’ll discuss the basics of jumbo loans, how they work, and more. Read on, and learn more from the team at Better Rate Mortgage..
What Is A Jumbo Loan? Understanding Jumbo Mortgages
A jumbo loan, also known as a “jumbo mortgage,” is a type of home loan with a value that exceeds the Federal Housing Finance Agency (FHFA) limits. Basically, this type of mortgage is too large to be purchased or guaranteed by federal authorities like Fannie Mae and Freddie Mac.
In 2020, this limit was $510,400. Because your loan cannot be sold or managed by the government, this means that borrowers who get jumbo loans must have excellent credit and a low debt-to-income ratio (DTI) and must provide comprehensive financial information to their mortgage lender throughout the entire application process.
Can I Avoid A Jumbo Loan?
Because the requirements of a jumbo loan are more rigorous than those of a standard mortgage, you may be wondering if it’s possible to buy a more expensive property while avoiding a jumbo loan. The answer is yes.
For example, let’s say you wanted to buy a home worth $650,000 in St. Louis. Normally, you would need a jumbo loan for this – even if you make a 20% down payment ($130,000), the remaining balance will be $520,000, which is a jumbo mortgage.
But if you put down 25%, you’ll reduce your balance to $487,500 – which is low enough to qualify for a conventional mortgage. If you have the means to do so, putting down a larger down payment can help you avoid a jumbo loan.
Is It Worth Buying A Home With A Jumbo Loan?
Yes! Jumbo loans are not necessarily bad or more expensive than traditional loans. If you have good credit, the rates are quite similar to traditional mortgages. And, in fact, most jumbo loan providers don’t require a full 20% down payment. You can put down 10-15% in most cases – without having to buy Private Mortgage Insurance (PMI).
So if you are interested in a more expensive home in St. Louis, don’t let jumbo loans scare you away from the property. Even though the requirements are more rigorous than standard loans, a jumbo loan is a perfectly viable way to purchase a home.
Contact Sean Zalmanoff To Learn More About Your Options
If you’re ready to explore your options for purchasing a home in St. Louis, including jumbo loans, the Better Rate Mortgage team is here to help. Contact us online or call now at (314) 361-9979 to schedule your appointment right away and get the assistance you need as you buy your next home in St. Louis.