Jumbo loans sound daunting to homeowners as people often associate this mortgage with luxury real estate properties, but you should feel intimidated since it’s only part of the many benefits it offers. In essence, jumbo loans are designed for borrowers who need an amount that goes beyond the allowable limit in conforming mortgages.
However, you don’t need to be on the hunt for the next best mansion in town to consider a jumbo loan. The myths surrounding this feasible loan product can make people feel stuck in a rut; that’s why we’re here to clear any misconceptions that may prevent homebuyers from exploring different possibilities with their loan options.
Debunking Common Jumbo Loan Myths
- You Don’t Need a Jumbo Loan if You’re Not Looking for Luxury Properties. Jumbo loans help borrowers get the amount they need when it doesn’t meet the limit stated by Fannie Mae and Freddie Mac. However, that doesn’t limit your options to million-dollar properties only since some homebuyers may find numbers arbitrary, especially in a volatile housing market. Different states also have various loan limits due to many factors, so it’s possible to purchase a single-family home that may exceed the conforming amount in your county. This means that jumbo financing is applicable for properties that seem modest but priced at a steeper amount.
- First-Time Homebuyers Cannot Get a Jumbo Loan. Jumbo loans deal with a massive amount of money, so getting approved for a jumbo loan will indeed be trickier for first-time homebuyers, but it’s not an impossible feat. The most critical factor lenders will focus on is your ability to financially support your mortgage payments in the next coming years. Having a strong credit score would immediately increase your position but following it up with a reliable cash reserve can boost the lender’s confidence in you as a trustworthy borrower.
- All Jumbo Loans Have Higher Interest Rates. It makes sense to think that jumbo loans, which often deal with millions of dollars, often come with a hefty interest rate. But if you compare the rates to a conventional loan, you’ll see that most rates only go one percent higher, so you don’t have to worry about breaking the bank when taking on a jumbo loan. After all, high-interest rates only increase if the lender sees you as a risk, so proving your capabilities to keep up with the mortgage payment will open you up to the opportunity to get a lower interest rate.
The Bottom Line: Telling Fact from Fiction Before Taking On a Jumbo Loan
Dane Costa, owner of HI Velocity Mortgage, shared this, "Getting a jumbo loan is possible for your average borrower, so long as you have the financial stability to show for with your lender. Many find these misconceptions restricting, but you’d be surprised how jumbo loans can be just as flexible as conforming loans, especially now that small-time and nonbank lenders also offer this option in their roster."
Why Choose HI Velocity Mortgage?
Applying for loans can be a complex process, especially for first-time homebuyers. Having the right guide can take the drudgery away from finding the right mortgage solution for you, so why not simplify your home buying journey with HI Velocity Mortgage?
They're the best mortgage broker in O'ahu, Hawaii, providing you with plans that meet your financial goals and make the mortgage process an easier ordeal. Get in touch at (808) 727-1055 and see what they can do to help you through the home buying and home lending process.