4 facts about jumbo loans
December 10, 2015
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If you're on the hunt for a larger, more expensive home, finding a mortgage can sometimes be a struggle. Luckily, with the continued recovery of the housing market, more and more lenders are offering jumbo loans.
Jumbo loans are mortgages that exceed the conforming lending limits set by Fannie Mae and Freddie Mac. These limits vary by area, but in most places the limit for a single-family home is $417,000. For borrowers looking to finance a larger home, here are three facts about jumbo loans:
- Most jumbo loans are adjustable rate. This means that the interest rates on a jumbo loan will periodically reset to align with to current market rates. Fixed-rate jumbo loans—where the interest rate remains set for the entire duration of the loan or until refinancing—are relatively rare.
- Expect to have to make a down payment of at least 20 percent. While lower down payments are possible, most lenders will be looking of a minimum of 20 percent of the loan's value as a down payment.
- Monthly mortgage payments can be no more than 38 percent of your income before taxes. Since jumbo loans are a riskier investment more money is at stake, lenders want to make sure that monthly payments are realistic for borrowers.
- Prepare to show you have financial reserves. A lender will want to see you have 2 to 3 months of cash reserves that is enough to cover principle mortgage payments, interest, taxes, and insurance.
New Penn Financial specializes in offering jumbo loans with some of the market's most affordable rates. It would be a pleasure to assist you in your search for home financing.
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