After finding the home of your dreams, you may discover that the half-million dollar price tag is a bit much for most banks to handle. For this loan amount, you may need to apply for a jumbo loan with a larger institution. If so, ask the following four questions before you begin the application process.
How Hard Is It To Be Approved For A Jumbo Loan?
Because of the extraordinary amount of money for which you will be applying, banks often have higher standards for jumbo loan applicants. More than likely, you will need an impeccable credit history, as well as a flawless financial background.
You and your significant other may also need to make a minimum amount each year. Some banks require that you make three or four times more than the potential monthly loan payment to qualify.
How Much Can You Borrow?
If your desired home costs a half million dollars, you should ask whether the bank is willing to loan that much. Some states have a cap on how much money can be loaned out with a jumbo loan.
After asking about the state maximum allowed, you should also ask the bank about their standard loan amount. Even if the state allows for the amount you need, the bank may not be willing to go that high.
What Is The Minimum Down Payment?
When applying for a jumbo loan, ask what the financial institute requires as the minimum down payment. You can expect this initial up-front cost to be substantial. You may need to put around a quarter of the loan amount down as a requirement. So, the higher the loan amount you are requesting, the greater the down payment you will have to pay.
What Type Of Interest Rate Comes With The Loan?
Another thing you should ask the bank is the type of interest rate that comes with the loan. Because of the substantial amount for which you will be applying, the bank will most likely require a variable interest rate instead of a fixed amount. As the housing market rises and falls while you have your mortgage, your interest rate will go up or down as a result.
After asking the above questions, you may feel you are qualified and ready to proceed with the application. If so, the representative of the financial institute at which you will be applying for the jumbo loan can answer any additional questions and guide you through the loan process.