The main difference between jumbo and conventional mortgage types is that jumbo mortgages are not backed by federal agencies such as Fannie Mae and Freddie Mac. Those agencies—which buy and re-package mortgages on the secondary market—cover conventional mortgages, or about 90% of the commercial lending market. This means, the guidelines for jumbo mortgage qualification are much more strict. While the rates have traditionally been higher, this has recently started to change.
Jumbo Vs. Conventional Mortgages
1. Proof of Income
An extensive, long-running proof of income and continuing liquidity is a stringent requirement of most “jumbo” mortgages, so-called because—while they tend to have a higher credit quality than conventional mortgage loans—jumbo mortgages are simply much bigger. The interest payments tend to be higher and they are much harder to refinance. In addition, luxury property may be harder to resell in a downturn.
2. Credit History
A strong credit history offers a slew of advantages, such as the ability to procure a loan or jumbo mortgage. Since these provide large amounts of money upfront for hefty purchases, a bank needs to ensure each applicant’s credit history is sterling. You need to be able to repay the full mortgage on schedule, along with robust interest payments. This is part of the reason why these mortgages are risky and not backed by federal agencies.
3. Considerable Assets
Bankers are interested in clients with considerable assets and a high net worth. Not only do they have more liquidity and thus qualify for jumbo mortgages, but—over the long-term gestation of a mortgage—these clients might be interested in other lucrative products the bank or mortgage issuer offers. Having considerable assets, including capital, wealth, and land, is considered collateral against which the bank can safeguard its investment.
The Mark Myers Team officers understand how stressful the home loan and homebuying process can be, especially if you've never applied for a jumbo mortgage loan before. They're committed to making the process as clear and easily understood as possible. With their in-depth experience and vast array of products, they are confident in their ability to find the best mortgage loan for any situation. Learn more about their services and apply for a loan on their website, or call (937) 545-8587 for a free consultation today.