Exploring Jumbo Loans
Big homes call for big loans. If you have been approved for a loan exceeding the conforming limit and are in the market for a more expensive home, you will be directed toward jumbo loan options.
The conforming limit is the maximum loan amount that government agencies Fannie Mae and Freddie Mac will buy after your loan has closed. It is a common practice for Fannie Mae and Freddie Mac to buy closed mortgage loans from lenders. Typically, this conforming limit is $417,000 but some areas have higher limits due to their aggressive housing market (think Los Angeles, Seattle, and San Francisco).
Jumbo loans come with a variety of terms but because of the higher loan amount, they generally have higher interest rates, stricter underwriting, and larger down payment requirements. Homes with high sales prices require jumbo loans to cover the cost of luxury homes. They are commonly known as high-end loans for borrowers who are spending more money on a property than average in the housing market.
Talk to your mortgage professional about the extra steps taken when acquiring a jumbo loan. Many lenders take extra precautions to ensure the large loan amount will be paid back. These loans are most appealing to high-end buyers who are able to put a lot of cash down in return for a big loan.