Shopping for a home to buy can be exciting and fun. Nothing can diminish the excitement quicker than finding your dream home costs more than you’d hoped. And you discover you may not be able to get the loan from your lender.
Ever consider a Jumbo loan? Jumbo loans are an ideal option today for homebuyers who find luxury homes that fall out of the guidelines that conventional lenders must follow.
This home loan program is used when the purchase price exceeds the amount set by Freddie Mac and Fannie Mae. As of 2018, the conforming limits for mortgage loans is $453,100. This means that if the price is higher than $453,100 the loan must be classified as a Jumbo loan. Because homes are more expensive in certain areas, the conforming limits are different in these areas.
In some areas, the limit is $679,650. Areas like Alaska, Hawaii, Guam and the U.S. Virgin Islands have higher limits. The highest conforming loan limit is $721,050. In some of the high-cost areas, a home buyer can get a mortgage loan for more than $700,000 and still pay the FHA’s minimum loan down payment of 3.5%.
When banks use the term “conforming loans”, what they are referring to are traditional mortgage loans given by banks and lending institutions. They’re called conforming because they conform to government guidelines regarding things like loan size, debt-to-income ratio and credit scores. Traditional mortgage loans are often referred to as conforming because they conform to government guidelines regarding things like credit, debts and loan size.
About the only similarity between conforming loans and this program is that they’re both used to purchase homes. Here are the differences between the two.
Despite there being some disadvantages to, there are many times when they’re the right choice. There are pros and cons to all loan types. Here are some advantages: