Also known as a non-conforming home loan, a jumbo home loan follows the guidelines quite closely to traditional home loans but there are a few marked differences that deserve mention. Firstly, a jumbo home loan is primarily used for larger property purchases than their conventional, USDA, FHA, or VA home loan counterparts. Moreover, with the average amount of a jumbo home loan exceeding the loan limits of the FHFA as well as both Fannie Mae and Freddie Mac (the nation’s two leading mortgage lenders, next to the United States Department of Agriculture & the Federal Housing Administration) in most cases, it’s safe to conclude that jumbo home loans are more of the exception as opposed to the rule regarding home loans. Secondly, when a home buyer opts for a jumbo home loan through a mortgage lender in which to purchase their home, they’re doing so without the added endorsement of both the U.S. Government and Freddie Mac & Fannie Mae. What that usually translates into is higher interest rates for the jumbo home loan due to the lack of backing or subsidizing safeguards that typically bolster other home loans, such as a VA home loan, USDA home loan, or an FHA home loan. Lastly, what is often the most redemptive balancing of higher interest rates associated with a jumbo home loan is the ability for certain borrowers to choose between a fixed-rate jumbo mortgage and an adjustable-rate jumbo mortgage.
Considering the amount of money being borrowed that qualifies as a jumbo home loan is quite substantial, it’s often the case that the recipient of the jumbo home loan is endeavoring to purchase a rather large property or one that is located in a very affluent neighborhood. However, there are certain endowments regarding the property types available for purchase through a jumbo home loan that bears drawing attention to; chief among them being the lack of restrictions on property occupation versus property investment.
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