Loans can always seem confusing, especially since lenders have the freedom to readjust the terms of their loans without straying too far away from their category. For homeowners looking for loan options, it’s necessary to understand the different loan types to have a better idea of their financing prospects.
Understanding Your Financing Prospects: Jumbo Loans
Jumbo loans are a mortgage plan that you can secure to finance properties that are generally too expensive to conforming loans. If a property costs beyond $550,000, the Federal Housing Finance Agency (FHFA) considers it beyond the maximum amount for a conforming loan. Beyond what a jumbo loan can secure, there are also several considerations you need to know before you think of it as a financing option.
In this article, we’ll share three facts about jumbo loans you should know about.
- Jumbo loans can go as low as requiring a 5% down payment. Since people correlate jumbo loans with luxury houses, it’s understandable that you could assume that jumbo loans will require a traditional 20% down payment. However, there are cases where you can pay as low as 5% of the property’s value. If you know how to find the right deal, you can purchase a luxurious property without burning a hole in your savings.
- Jumbo loans can accept loan applicants with a credit score of 660 and up. Except for specific loan options, every loan plan has a credit score requirement. Generally speaking, the higher the loan’s purchasing price, the higher the credit score you’ll need to apply for it. Like the misconception about a full 20% down payment, jumbo loans also get a bad reputation for having an overly demanding credit score requirement. Since it’s a sizable investment for people with middle-level income and below, most people believe that they need a credit score of at least 700 to be eligible for it. However, some homebuyers can secure a jumbo loan with credit scores as low as 660. Although it’s not necessarily a low score, it’s not as impossible to achieve even for middle-income citizens.
- Jumbo loans can consider other financial assets for cash reserves. Besides the perceived 20% down payment, people assume that jumbo loans will also demand a full year of cash reserves. Unless you’re hiding a few hundred thousand dollars in your savings, this can seem like an impossible task. Thankfully, there are jumbo loan options that can consider other forms of assets as cash reserves. You can pay through stocks, retirement accounts, and business funds to build a year’s worth of financial funding. Alternatively, you can also find jumbo loan programs that won’t require any cash reserves at all. It’s best to consult a mortgage expert on how you can go about these special exceptions that can benefit your financial needs.
Jumbo Loans Expert in Michigan: The Mortgage City
Being aware of the scope and limitations of what loan you’re planning to apply for lets you cut down your options to find the ideal deal. Besides knowing what you have to prepare for your application, it also prepares you for the responsibilities and guidelines you need to follow throughout the loan’s term. It’s best to receive a mortgage expert’s professional opinion to ensure that you’re making the right decision for your current and future financial well-being.
If you’re buying a house in Michigan City, our loan officers can give you a run-through of your potential financing options. We can seek out the right lenders for jumbo loans in Michigan to finance your home. Call us now at (248) 930-8709 today!
