3 Common Risks of Super Jumbo Loans

What are super hard money jumbo loans?

A super hard money jumbo loan is a type of loan that is used to buy large and pricey properties. The super hard money jumbo loans can also be used as a refinance. It is a type of loan that mostly amounts to at least $650,000. This exact type is not strictly regulated as in the case of conventional hard money jumbo loans. 

The super jumbo loan is considered non-conforming and doesn’t have the common government guideline due to its large size. The hard money jumbo loan lenders have strict requirements that are to be met before they approve a loan this big. If you are funding an amount that falls into the super jumbo loans classification, you will probably need a huge down payment, a long employment history, and a good credit score. The lender will then grant you the super jumbo loan depending on your profile.

This type of loan carries a weighty amount of risks to both the lender and the borrower. You will have to get the credit standards strict than the traditional loan. The risks are as follows.

Locating a lender

There are very few financiers that are willing to work with clients who need this type of hard money jumbo loans. Parting with millions of dollars for just a piece of residential luxury property is sometimes a difficult thing for lenders to do. Therefore, it will be hard to get competitive interest rates. In most scenarios, you will have to work with a private investor to secure the funds.

Low Loan to Loan ratios

Working with a smaller loan-to-loan ration is another risk of the super hard money jumbo loans. You will have to put up a significant amount of money to pay for the property. You will lose a substantial sum of your money that you would have used to buy a home with a traditional loan if you can’t afford to make the payments on the house.

Interest rates

Hard money jumbo loan borrowers rarely focus on the interest rates. Most lenders charge one to two percent more than the standard hard money jumbo loan rates. The interest rates can be higher. This will depend on the amount of your hard money jumbo loans and the loan-to-loan value ratio. Because interest rates can be higher, many borrowers choose to get two different hard money jumbo loans so that they can separate the amount that they are borrowing hence avoiding the high-interest rates.