If you are planning on buying an expensive house, you might need a large down payment. In cases like this, a jumbo loan is what you probably need.

If you intend to buy a home in a city with a high cost or a luxury house, a Jumbo loan Texas will help you delve into the market of high-end properties. Jumbo loans may provide you access to more money however it is best to keep in mind that these are usually a lot more expensive because of the involving risks that come with it, and they are a bit harder to qualify in comparison to the conventional mortgages.

Jumbo Mortgage

A jumbo mortgage is a loan that has a higher loan limit compared to conforming loans set by  Freddie Mac or Fannie Mae. Because of this, jumbo loans are usually referred to as non-conforming loans. In the US, the limit for conforming loans is $417,000 for several states. Jumbo mortgages exceed this set limit.

As a result, there is a high risk included with borrowing a lot of money. The lenders will charge you a higher interest rate, and you might have to face more substantial down payment requirements and underwriting that’s stricter.

You can avail of jumbo loans for vacation homes, primary residences and investment property types whichever you prefer. There are also available adjustable and fixed rates.

Should You Choose a Jumbo Loan?

If you want to purchase a luxurious and expensive property and you have a high credit score, low debt-to-income ratio, and a sizeable down payment, you might qualify for a jumbo loan. This type of loans usually suits high-income earners and those with strong financial status with good financial discipline and credit history.

Pros

Convenience

You don’t need to get two or more loans using a jumbo mortgage. You can manage one.

Access to funds

One of the best benefits of jumbo loans is that you can have access to a lot of money that far exceeds the conforming loan limits. With this, you can easily buy the high-valued or luxury property you wanted.

Choose from different rate

Unlike traditional loans, you can choose an adjustable or fixed rate when getting a loan. This allows you the flexibility to create the loan you want.

Cons

Market risk

If the property you bought decreases in value, you might lose your house’s equity which can be a bit of a problem since jumbo loans usually have higher interest rates than conforming loans.

Difficult to refinance

During the term of your loan, the jumbo loan can be a bit hard to refinance.

Strict credit requirements

Lenders know that jumbo loans are risky, that’s why they will ask for proof that you can afford jumbo loans. Make sure you have a credit score that is higher than 600 or else you might have to put down a loan that’s larger.