Are you in the process of looking for a home and will need to get a jumbo loan to purchase it? You likely have a few questions about this different type of loan.
What Exactly Is A Jumbo Loan?
A jumbo loan is necessary when you are purchasing an expensive home. That's because you need to borrow more money than what a conventional loan allows, which is up to $647,200 in most areas as of 2022. That number also continues to go up each year as homes get more expensive, and can be higher in certain parts of the country where home prices are typically higher. If you potentially need a jumbo loan based on the homes you are looking at, your lender will let you know.
What If Your Potential Home Is Above The Lending Limit?
One thing to be aware of is that the purchase price of the home can be over the lending limit for a conventional loan, and you can still qualify for a conventional loan. That's because the loan limit is based on the amount of money that you need to borrow to pay for the home, not the total cost of the home. If you can provide a big enough down payment to get the loan under the loan limit for a conventional loan, then that will be an option for you.
How Big Of A Down Payment Do You Need For A Jumbo Loan?
You should know that a jumbo loan is going to be riskier than a conventional loan, which is simply because of the amount of money that the lender is providing you to make your purchase. That is why it is not uncommon for a lender to request a large down payment for a jumbo loan. The amount of the down payment varies between lenders since they are not bound to any federal minimums for a down payment, but you can expect to provide more than necessary for a conventional loan.
What Will The Lender Want To See To Approve A Jumbo Loan?
Your finances will be looked at closely when getting a jumbo loan. One thing that a lender will look for is how much money you saved up in order to make future mortgage payments. They will look at cash and investments that can be used if you were to need them. While there is no requirement about how many months of reserved cash a lender looks for, be aware that it will be on their radar.
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