Definition & Benefits
Jumbo and Super Jumbo Loans are a type of home loan that exceed the conforming loan limits set by Fannie Mae and Freddie Mac. In most areas, the conforming loan limit is $548,250 for a single-family home, but in certain high-cost areas, the limit can be as high as $822,375. Any loan amount above these limits is considered a Jumbo or Super Jumbo Loan.
Qualifying for a Jumbo or Super Jumbo Loan typically requires a higher credit score, lower debt-to-income ratio, and a larger down payment than a conforming loan. Lenders may also require additional documentation to prove income and assets. However, Jumbo and Super Jumbo Loans offer several benefits, including:
Higher loan amounts
Jumbo and Super Jumbo Loans can be used to finance high-end properties that may not be eligible for a conforming loan.
Flexibility
Jumbo and Super Jumbo Loans can be structured in a variety of ways, including fixed-rate, adjustable-rate, and interest-only options.
Investment opportunities
Jumbo and Super Jumbo Loans can be used to finance investment properties and vacation homes.
Tax benefits
Interest paid on Jumbo and Super Jumbo Loans may be tax-deductible, subject to certain limitations.
Low interest rates
Despite the larger loan amounts, Jumbo and Super Jumbo Loans often have competitive interest rates due to the lower risk for lenders.
Varieties of Jumbo Loans
Fixed-rate mortgages
These loans have a fixed interest rate for the life of the loan which can range from 10 to 30 years.
Adjustable-rate mortgages
These loans have a variable interest rate that can fluctuate over time, typically after an initial fixed-rate period.
Combo loans
These loans allow borrowers to pay only the interest on the loan for a certain period of time, typically 5 to 10 years, beforebeginning to pay down the principal.
Interest-only loans
These loans allow borrowers to pay only the interest on the loan for a certain period of time, typically 5 to 10 years, before beginning to pay down the principal.
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