4 Common Myths Associated With Jumbo Loans L1:B2

Hard money jumbo loans are now easily accessible and a viable option to many first time homebuyers in some parts of the country. Jumbo loans are a type of mortgage that exceeds the set limit for government insured loans. The set limit in most parts of the country is $417,000 or $625,000 in areas that have a higher cost of living.

Hard money jumbo loans have a reputation for being hard to get and very expensive. This causes several eligible buyers to dismiss them and opt for conventional loans because they are believed to have lower interest rates compared to jumbos and other nonconforming loans. However, although hard money jumbo loans were expensive and had several barriers in the past, today they are more accessible and have affordable rates.

4 Common Myths Jumbo Loan Myths

Myth No 1: They are Only Used to Purchase Mansions

In some of the expensive cities in the country, you may be hard-pressed to find a house that requires a mortgage that fits the conforming limits. For instance, in areas where the median home price is $1 million, then most homebuyers would qualify for these hard money jumbo loans. Some parts of the country with hot housing markets have also pushed middle-class properties up into hard money jumbo loans category.

Myth No 2: You Are Required to Pay a Hefty Down Payment to Qualify

Some time back people had to pay a down payment of up to 30% to qualify for hard money jumbo loans. That isn’t the case today. Competitive lenders are now looking for qualified buyers and offer hard money jumbo loans for a down payment of 10%. Unlike conforming loans, when you put a down payment that is less than 20% of your hard money jumbo mortgage loan, you won’t increase the cost of the mortgage insurance.

For you to qualify for a hard money jumbo loan with a low down payment, you need to have a good credit record, and you may also face strict requirements on your cash reserves and debt-to-income ratio. However, the jumbo lending requirements have been loosening up for the last couple of years. Just like any other mortgage, you should conduct a deep research as you shop around to ensure that you get only the best rate.

Myth No 3: Conforming Loans Have Better Rates

When the real estate industry was booming at its peak, the rate of hard money jumbo loans was a half-point higher than that of conforming loans. However, these rates have changed over the years, and some banks are now offering these loans at rates as low as 3.8% which is lower than that of conforming loans which is at 3.85%.

Myth No 4: Jumbos Have Fewer Options

After the mortgage crisis, only the well-established banks could give hard money jumbo loans. However, because the market has now improved, there are now more small hard money jumbo loans lenders and online nonbank financiers that have emerged to offer more jumbo loans. Because there is a lot of jumbo activity, and several lenders want part of the market share, the pricing has now become competitive.