Homebuyers who dream of settling down in the higher-end neighborhoods often rifle through a housing list with prices that go way beyond the allowable loan limit set by Fannie Mae and Freddie Mac. With limited mortgage options available for a high-cost purchase, it’s the prime time to take on a jumbo loan.
Reading up on misinformation for homebuyers who plan on acquiring a jumbo mortgage loan can muddle their decisions and hold them back from breaking into the luxury housing market. This can prevent people from moving forward when other loans fall short; that’s why we strive to clear common myths so you can understand your options when buying a home that’s too high for a conventional mortgage.
Jumbo Loans Myths
- Jumbo Loans Means Higher Interest Rates. Many people lose interest in taking out a jumbo loan since most would associate it with a high-interest rate. It’s an understandable misconception since jumbo loans are used for luxury properties, but it’s not always the case. Just like conventional loans, the interest rate largely depends on your creditworthiness. Some may deal with higher interest rates; others can even beat the lowest rating you can get from conventional loans if you have an excellent credit score to show. Not to mention, offering low-interest rates are one of the biggest appeals lenders use to sway borrowers.
- Only Borrowers With Perfect Credit Scores Can Leverage Jumbo Loans While it’s true that having an excellent credit score can increase your success in taking on a low-interest jumbo loan, it doesn’t necessarily lock out other borrowers. A strong credit score will get you a better deal, but multiple programs allow people with a score below 700 to take on a jumbo loan. Of course, lower credit scores increase the risk to lenders, so it’s only logical to offset it by asking for a higher down payment or easing their confidence with a low debt-to-income ratio to reduce your risks.
- Jumbo Loans Always Ask for High Down Payments. Not all people will have a strong credit score, which is why you’ll often see jumbo loans asking for a high down payment to counterbalance the risk that comes with a typical borrower. However, that doesn’t mean that all down payments come at a steep price range as they can go for as low as five percent, depending on multiple factors. So long as you can demonstrate reliable and sustainable financial stability, you can apply for a jumbo loan without having to shell out a massive down payment.
The Bottom Line: Understanding the Truth Behind Jumbo Mortgages to Maximize its Potential for Homebuyers
Shannon Christenot shared this, "Jumbo loans can be a silver lining for homebuyers who want to purchase properties that go beyond Fannie Mae and Freddie Mac’s loan limit. It doesn’t immediately equate to luxury real estate only since the limit varies from state to state, which means jumbo loans are not limited to mansions."
There are plenty of misconceptions that restrict a potential buyer from taking advantage of jumbo loans; that’s why the list above should bust these myths so you can arm yourself with the right information when conventional loans fail to meet your needs.
Why Choose Shannon Christenot?
They're the best mortgage broker in Los Angeles that can help make your home loan work for you. Whether you need help with property investing or construction loans, they can take the guesswork out of these requirements and ensure you can settle down into your dream home in no time. Get in touch at (818) 601-2231 and get a free mortgage rate quote today!