When Do Homebuyers Need Jumbo Loans in 2021?
When Do You Need A Jumbo Loan in 2021?
When purchasing a home anywhere in America, the lender might set a few limits on how much you can borrow. The first limit is determined by your debt-to-income ratio. This usually requires that your monthly mortgage payments and related costs amount to no more than a certain percentage of your income. Fannie Mae and Freddie Mac also set a baseline limit for most areas in America. Buyers who need higher loan amounts require jumbo loans.
What Are the Mortgage Limits?
According to the Federal Housing Finance Agency, most geographical areas will have a 2021 conforming loan limit of $548,250 for single-family homes. However, high-income areas have a higher limit of $822,375. Generally speaking, only 18 counties did not see an increase in the baseline loan limit.
There are also separate baseline loan limits for U.S. states and territories outside of the U.S. mainland. These areas’ limits are in line with higher-income areas and include the following:
- U.S. Virgin Islands
- Hawaii
- Guam
- Alaska
Some states and territories have only one baseline limit. For example, the baseline limit in Alaska is the same $822,375 in all counties. Meanwhile, California has different limits across counties. In San Diego County, the baseline loan limit is $753,250.
What Are Good Reasons for Getting Jumbo Loans?
If you have a high income and want to purchase a bigger or more luxurious home, then a jumbo loan becomes necessary. Homes located in wealthier parts of town might also require these loans, even when the home is not a large one.
In fact, it is not uncommon to see condos in San Diego selling for upwards of $800,000. Finally, these loans might become necessary to purchase the following types of property:
- Multi-unit properties
- Farmland
- Ranches
- Bed and breakfasts
What Are the Benefits of a Jumbo Loan?
It might provide the only opportunity for buyers to secure the home of their dreams without emptying savings to pay in cash. Here are some additional benefits to keep in mind.
Savings
Most buyers put down 20% or more for jumbo loans. This eliminates the need for private mortgage insurance.
Flexibility
Some lenders offer greater flexibility regarding how to qualify for jumbo loans. For example, you can provide bank statements or documentation for existing properties.
Great Rates
This isn’t a benefit that’s true of all lenders. However, if buyers shop around, they will find that not all lenders want to charge an arm and a leg for the right to receive a non-conforming mortgage.
How Do Homebuyers Become Eligible?
Lenders do have stricter qualifications for a jumbo loan than any other type on the market. These are common requirements you will find across most lenders:
- Proof of income and lifestyle expenses
- Proof of ability to repay the mortgage
- Down payment of 20% or higher
- Good credit score
The Bottom Line
Jumbo loans open up a world of opportunities in the real estate market. Why settle for less than what you want and what you can afford? Request a quote from UW Funding, Inc. today!
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