What Are Jumbo Loans?
When you’re in the market to finance a piece of real estate, the variety of mortgage options available can be overwhelming. Mortgages can be conforming, non-conforming, prime, subprime, adjustable rate, fixed… it’s like you need to learn a whole new vocabulary just to figure it all out!
How Much is a Jumbo Loan in Hillsborough County?
However, a jumbo loan, or jumbo mortgage, is pretty straightforward. If you imagine a jumbo loan is simply a loan for an extra large amount of money, then you’d be right! In most areas of the United States in 2022, including Tampa Bay, a jumbo mortgage is any mortgage that exceeds $647,200. The only area of Florida where a conventional mortgage can exceed this limit is Monroe County (home of the Florida Keys).
How is a Jumbo Loan Different Than a Conventional Mortgage?
Conventional mortgages, also known as conforming mortgages, are backed by the federal mortgage agencies, Fannie Mae and Freddie Mac. These agencies buy and guarantee mortgages on the secondary mortgage market, making it less risky for financial institutions to lend people money because if the mortgage holder defaults, Fannie or Freddie will cover the losses.
However, this is not the case with jumbo mortgages. Jumbo mortgages are considered nonconforming, so Fannie/Freddie will not buy or guarantee these high-priced loans. If the mortgage holder defaults, the lender is on the hook for the entire loss. So, it should come as no surprise that jumbo mortgages have much stricter eligibility criteria than conforming mortgages. Some of that criteria include:
- A credit score of 700 or above
- Extensive documentation of income and debts
- Higher down payments, usually at least 20% of the sale price
- Requirement for at least two separate appraisals
- Strict debt-to-income requirements
- Enough cash on hand to cover at least one year’s worth of payments
Along with stricter eligibility criteria, jumbo mortgages often come with less desirable terms than conventional mortgages. For example, most jumbo mortgages have higher interest rates than conforming mortgages and you can also expect more fees and costs at closing.
Need a Jumbo Loan for your Dream Home?
If you’re in the market for a home in Tampa Bay that costs more than the $647,200 limit for conventional mortgages, a jumbo mortgage may be in your future. Contact the real estate experts at Benefit Title Services in South Tampa to find out how we can save you cash at closing, no matter the property’s sale price. Let us help you handle all of the details such as ordering appraisals and inspections, retrieving documents, and facilitating communication between you, the seller, and your lender. Call (813) 251-1420 or contact us online today to get started!
