The steady rise in home prices has created a greater demand for jumbo loans. As of mid-2017, the average cost of a single-family home in the U.S. reached $371,200 (according to ycharts.com). That’s heading closer to the maximum mortgage limit of conventional loans eligible for purchase by Fannie Mae and Freddie Mac, currently at $424,100. Loans above that limit are called nonconventional or jumbo loans. Because jumbo loans aren’t guaranteed by Fannie Mae and Freddie Mac, they have much stricter credit requirements.

The prevalence of jumbo loans has jumped from 5.5 percent of all mortgages in the U.S. to over 20 percent in the last seven years. If you’re wondering whether a jumbo loan is right for you or if it’s even a possibility, it’s important to understand how this type of loan differs from a conventional loan.

Interest rates are often the same or lower. It used to be a sure thing that jumbo loans would command a higher interest rate than their conventional counterparts. But it’s common today to find them as much as a half a percentage point less than conventional loans. The bigger the mortgage, the more willing a lender may be to lower the rate.

Down payments are typically 20 percent. With conventional loans, you’ll find all sorts of down payment requirements, some as low as 5 percent down. With a jumbo loan, you can also find lenders with low down payment requirements, but this usually means a much higher interest rate than a conventional loan. The 20 percent down payment is more typical and will get you a better rate.

It’s tougher to qualify and you’ll need plenty of paperwork to prove your worth. Since lenders need to reduce the likelihood of default, they’ll often require the jumbo loan borrower to have stellar credit and a low debt-to-income ratio. You might also need two years’ worth of financial statements instead of one to demonstrate your financial history. Think of it as a harder test you need to pass.

You’ll need a higher reserve of cash. Because jumbo loans are larger than conventional ones, lenders want to see that the borrower is in a stronger financial position to pay the loan. Many financial institutions require to see six to twelve months of mortgage payments set aside in reserves.

Mortgage insurance is often paid for or waived. Because of the higher down payment and rigorous qualification process, jumbo lenders frequently pay for private mortgage insurance themselves or it is waived.

As with any type of conventional loan, you need to be certain that a jumbo one is a good fit for you. The type of home that requires a jumbo loan is an expensive proposition that is probably higher cost to maintain as well. Ask yourself whether you can always make the payments. Is there anything in your foreseeable future that would change your ability to afford the monthly payment? Are prices stable in the location you’re buying or are they showing volatility? Research what happened to home values in that area during the last housing slump. What’s your game plan if the value of your house were to go down?

Be a smart borrower. Be certain that you can always pay the monthly amount along with the upfront fees that larger mortgages require. Also make sure it’s possible to prepay the loan with no penalty. This is important if you ever want to refinance or sell before you’ve paid off your loan.

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