July 23, 2021
In some of today’s most desirable real estate markets, it can be difficult to determine how to finance your dream home. That’s because the limits imposed on most loan products backed by Fannie Mae and Freddie Mac set strict limits on how much you can borrow. With a jumbo loan, however, you have more options than ever before, allowing you to choose the home you want in the neighborhood you want without worrying about the stress and inconvenience of multiple mortgages.
1. More Money Available
Because a jumbo loan is a non-conforming loan, it is not bound by the limits placed on loans that the Federal Housing Finance Administration backs. Conforming loan amounts range from $647,200 up to $970,800 (for 2022), which could mean that your mortgage is insufficient for your home buying needs or market requirements. With a jumbo loan, you can be approved for a larger loan so that your options are wide open.
2. May Need Less Than 20% Down
Jumbo loans offer the flexibility of either a 20% down payment or a lower down payment with private mortgage insurance (PMI). That can mean significant savings upfront with various options depending on your income, credit history, budget, and other qualifying factors.
3. VA “Jumbo” Loans Are Available
Jumbo loans aren’t limited to conventional loan products. You’ll also find Veterans Administration (VA) “jumbo” loans since VA-eligible borrowers are not subject to loan limits. That means that if you qualify for VA financing, you can enjoy all of the advantages of a VA loan including excellent jumbo interest rates with none of the frustrations of conforming loan limits.
4. Opportunity to Buy a Larger Home
These days, more and more families are choosing to re-think the way they’re living. They may select multi-generational homes with elderly family members, adult children, and grandchildren. Single home buyers may choose to buy with friends, siblings, or significant others. When different people live under the same roof, the opportunity to purchase a larger home just makes sense for many contemporary borrowers. A jumbo loan provides additional funds to make that possible.
5. Opportunity to Own More Land
With the increased availability of work from home lifestyles and rising demand for new construction, more and more homebuyers are looking to rural areas for their next home. In some cases, that may mean buying more land for homesteading or for maximum privacy. Jumbo loans offer the option of investing in bigger lots for larger homes and more outdoor amenities.
6. Buy in More Desirable Markets
Many of the country’s most desirable markets commonly see home prices far above the FHFA’s conforming loan limits. Jumbo loans provide options that allow buyers to choose the best neighborhoods and the most desirable in-town or resort communities. This can pay dividends in appreciation when those markets continue to enjoy high demand in the years ahead.
7. Purchase a Luxury Home
If you’ve been dreaming of a luxury home or a home located in a resort-style community, a jumbo loan is a great option. Not only will you enjoy the convenience of a larger loan product -- but you also won’t be limited when you’re choosing the floorplan and amenities that work best for you.
8. Consolidate Home Financing
Without jumbo loans, borrowers would be forced to use multiple loan products for one residence or spend years saving enough to pay cash outright or offset conforming loan limits for their market. Jumbo loans offer the ability to consolidate home financing under one loan product for added convenience and streamlined financial management.
9. Explore Jumbo Renovation Loans
If you’ve fallen in love with a fixer-upper, you may be wondering how you’ll purchase and renovate your new home. With jumbo renovation loans, you can obtain one loan for both the purchase or refinance of the home itself and the funds you need to renovate the space. You enjoy the benefits of fixed interest rates and longer loan terms while creating the home of your dreams.
10. Finance Multi-Family Investment Properties
If you’re looking for the opportunity to maximize the financial benefits of a jumbo loan, consider purchasing a duplex, triplex, quad, or other multi-family property. House hack by living in one of the units and renting the others or rent all of the units to maximize your property’s investment potential.
To learn more about PenFed loans or what loan is right for you: