If you’re buying a high-priced property, you may find yourself in need of a jumbo loan.
These loans differ from traditional mortgages because they finance more expensive homes. Nationally, the threshold for a jumbo loan is any property that costs more than $510,400. In some more expensive markets, that amount increases to $765,600.
Do you think you’ll need a jumbo loan for your next home purchase? Here’s what you should know:
What are the costs?
Because jumbo loans mean that you’re borrowing more money, they also come with higher costs. You’ll likely have a higher interest rate than you would with a conventional loan, and there may be additional closing costs as well.
How do I qualify for a jumbo loan?
This type of loan is riskier for lenders since there’s more cash on the line. That means that borrowers need a higher credit score (often 700 or above), as well as a larger down payment (at least 20%). You might also need cash reserves in some cases — usually enough to cover six to 12 months of mortgage payments.
Is there anything else to know?
Jumbo loans may require two appraisals to verify the value of the property instead of just one. As with other loans, the borrower pays for these at closing.
If you’re eyeing a property that could call for a jumbo loan, it’s best to talk to a mortgage professional before getting too far into your search. Reach out for a lender referral.