The majority of people make enough money over the course of their lifetime to afford today’s modern wants and needs: A home, a car, and a few extras along the way. Unfortunately, the most Americans never make enough money all at once to afford these things outright. Thus we have a loan industry in the United States and a way for folks to make payments on the major purchases they make in a lifetime. Almost everyone is familiar with the basics of a traditional loan, but the general population isn’t as familiar with the big boys of the bunch: Jumbo loans. These are the loans that people take out when they need more money than the usual conforming loan amount (not to exceed $453,100 in most states). If your upcoming purchase is for a luxury home, vehicle, or other expensive product exceeding the conforming loan limit of $453,100, you might want to learn about the Jumbo Loan. It’s going to be your best friend in helping you walk away with the purchase you want to make.
Jumbo Loan Basics
If you have your eye on a very expensive home and want to take out a loan so that you can afford it, a Jumbo Loan is your solution. Jumbo loans go all the way up to about $1,500,000 and include much greater scrutiny of your finances and credit score than other loans. First, you’ll need to find a lender that offers Jumbo loans. Their interest rates and terms will vary, so financial advisers are handy in this situation. If you’re not familiar with the Jumbo Loan, you need a lender you can truly trust plus someone who can serve as an outside adviser to the terms of the loan. Is it a good deal? Is it realistic to think you could be approved for such a loan?
The Big Three of Approval
To be approved for a Jumbo Loan, your lender will look at three facets of your financial life.
- 1. Credit Score: If you credit score is under 740, it’s highly unlikely that you will qualify for a loan of this nature. If your income can offset a bit lower credit score, it’s not out of the question that you could be approved, but as a general rule 740 is a starting point for approval.
- 2. Financial Power: What is your financial situation? A good rule of thumb for Jumbo Loan approval is to look at your debt-to-income ratio. On average, financial strength should include at least a 45% debt-to-income ratio before approval becomes more likely. You can easily determine your debt-to-income ratio via some simple instructions from financial websites, and often you will come across an easy calculator that helps you automatically determine your financial power.
- 3. Appraisals: If you’re buying a luxury home, property appraisal will come into play. Your lender will need to know that the home’s appraisal is accurate for the price of purchasing the home. They’re not going to over-lend. There may be appraisals on other types of Jumbo Loans as well, but for the most part, property appraisals are the most frequently used.
Is a Jumbo Loan Right For You?
There are certain luxuries and amenities out there in the world that go above the average American’s budget, but if you fall into an income bracket that allows you to realistically afford that which the average American can’t afford, you’re definitely lucky and open to the prospect of taking out the Jumbo Loan. Lenders will look at your income, debts, and potential purchases just like they do on a regular loan, but the standard for approval will be much higher than if they were loaning you a smaller amount of money.
If you have your eye on a house or vehicle that you’re going to need some serious loan money to obtain, a Jumbo Lender can help you. These lending agencies are used to working with clients who have above average incomes, financial strength, and buying power. There will be more extensive lending requirements and varying interest rates, but if you’ve got your eye on a major luxury home or vehicle, a Jumbo Loan is the type of loan that you need to be looking into. You can contact lenders to get information about their interest rates and terms before committing to any one lender, but the first type of loan that should be on your mind is the Jumbo loan (sometimes called a Jumbo mortgage if you’re in the market for a house). Whether or not it’s a wise decision for you depends on what your income is, what your credit score is, and whether or not the property or asset you have on your mind is worth the price they’re asking. If you meet all the requirements, a Jumbo Loan is right for you.