Home loans fall into two categories based on their loan amount: conforming and jumbo loans. If you need a home loan that's over the conforming limit, you will probably need to get a Jumbo mortgage.
Jumbo loans offer the same flexibility as conforming loans, however the only difference is that they are not eligible for purchase by Fannie Mae or Freddie Mac and must be sold in the secondary market. This means that the rates for Jumbo loans will be slightly higher than home loans with similar terms that are conforming loans. Sometimes you may hear Jumbo loans referred to as non-conforming loans.
Who Should Get A Jumbo Mortgage?
If you are able to afford a more expensive home, but haven't saved up enough money to bring the loan down to conforming limits, a jumbo loan is a great option for you.
If you're looking to find your "forever" home, and know that as time goes on your income will increase, a Jumbo loan could be an affordable home loan option for you. This may be a good way to bypass the "starter home" and prevent you and your family from moving at a later date to a bigger home.
Perhaps you've found the perfect home, but it just happens to be in a neighborhood where all the homes are highly priced. A jumbo loan may be the only option you have in order to buy a home, due to the high-value real estate in the area.
Things You Should Know About a Jumbo Loan
A jumbo mortgage is a great way to rapidly build your credit. By making your payments on time, you'll quickly see your credit score improve.
Due to the large amount of a jumbo loan, it may be more expensive to refinance a jumbo mortgage, mainly because of higher closing costs.