What to Know about Jumbo Loans
Jumbo loan limits typically change yearly and may differ from state to state. Most states, including South Dakota, follow the standard federal purchase limits. However, places like Hawaii and Alaska have higher home prices and conforming limits.
Jumbo Loans have Different Qualifying Requirements
Because the government does not back jumbo home loans, lenders usually have stricter qualification requirements. For a jumbo loan, you will need very good or excellent credit, higher annual income and a lower debit-to-income ratio. Since private lenders assume the risk, you may also be required to prove you have enough cash reserves or assets to cover up to six months of mortgage payments.
Jumbo Loans May Have a Higher Interest Rate
Like conforming loans, interest rates will vary depending on your credit qualifications. A higher down payment may help you find a lower interest rate. Refinancing a jumbo loan can be more complicated and tends to have higher closing costs and fees.
Is a Jumbo Loan Right for Me?
In some cases, a jumbo loan may be your best option for financing a higher-valued home. However, depending on your lender, credit and income, you may be able to take out a conventional loan and a second mortgage at a lower interest rate to cover the purchase price. The only way to know your options is to talk to a qualified, local lender.
Disclosure:
For informational purposes only.