Since a jumbo loan varies from a traditional mortgage, there’s more flexibility in the mortgage terms. A jumbo loan may be easier to attain for certain individuals than traditional loans, and jumbo loans are becoming more attainable, and they come along with better rates than they have in the past. Here’s why current jumbo loans are more attainable:
The Advantages of a Non-Conforming Loan
Jumbo and super jumbo loans are considered non-conforming mortgage loans. Non-conforming loans include loans that surpass the national $417,000 loan limit. Non-conforming loans currently have lower rates than conforming loans, so while you may be borrowing more money, the interest incurred on the loan may be lower. Borrowers can expect about .25% lower interest rates on a jumbo or super jumbo loan over a traditional mortgage loan.
Flexibility on Debt-to-Income
Since jumbo and super jumbo loans are non-conforming loans, some banks are more flexible on issuing loans according to an individual’s debt-to-income ratio. In a traditional mortgage loan, your monthly bills cannot exceed 43% of your income. In a jumbo or super jumbo loan, an individual may be able to attain a loan even with a debt-to-income ratio of 46% or less.
When calculating an individual’s income, traditional mortgage loans have rigorous restrictions. For example, attaining a traditional loan may require that your income is steady and proven over multiple years. A jumbo or super jumbo loan provider may only take into account the most recent year’s income when considering the eligibility of a loan recipient.
Credit Score Similarities
Jumbo and super jumbo loans are generally available to the individuals who have high enough credit scores to attain a traditional loan. If you have a credit score of 680 or above, it’s likely that you’ll be able to obtain a jumbo or super jumbo mortgage loan. Moreover, just the same as with traditional mortgage loans, a higher credit score lends itself to a better loan interest rate.