Have found the home of your dreams in Irvine, CA? Do you want to be the proud owner of this palatial mansion? Well, this is where jumbo loans come in. These are very large loans, usually more than $417,000. Considering a lender ends up risking a large amount when lending this loan, jumbo mortgage tends to be quite difficult to get. Nonetheless, in places like California, New Jersey, New York and Connecticut, where real estate prices are soaring sky high, jumbo loans are the norm. However, before you decide to apply for such a loan, it is prudent to understand the advantages and disadvantages associated with the loan. It will help you make an informed loan decision.
Benefits of Jumbo Loans
Here are some benefits of jumbo loans that you should be aware of if you are in the market for such loans.
- Access to Large Amount of Money: There is no doubt real estate is expensive, especially in Irvine, CA. Average home prices in Irvine are in the region of $829,000, according to the National Association of Realtors. Most people would have to exhaust their savings to purchase a large home, but they don’t do it because they have access to the jumbo.
- No Need for Multiple Loans: As jumbo loans offer large amounts to borrowers, it removes the need to approach two or more lenders to get money to buy a home. With a single loan, it simplifies the life of the borrower, who just has to one monthly installment.
- Range of Jumbo Loan Options: Just like any other mortgage, jumbo loans offer different types of interest rates to suit the borrower. So, whether you want a fixed rate or adjustable rate jumbo, you can opt for it depending on your ability to make monthly payments.
- Interest Rates for Jumbo Loans Are Getting Attractive: Thanks to the federal stimulus package in 2009, interest rates for jumbo loans have dropped. This was done to spur the real estate market and boost economic growth. Compared to pre-2009 rates, jumbo loans today have low interest rates and if you like you can refinance your jumbo loan for a low-interest loan, as well.
- Lenders Are Making Loan Application Easier: In Irvine, CA, lenders have made it easier for prospective homeowners to apply for jumbo loans. This said, it is still not the easiest loan to apply for, but compared to a few years ago, the loan application process has been streamlined and made more borrower-friendly.
- Lenders are Making Jumbo Loans More Attractive: Whether it is New York or Irvine, CA, lenders are attaching attractive offers to jumbo loans. These include private medical insurance, reduced lender fees and quicker processing of the loan application. However, just qualified borrowers are approved and they are people with high credit scores and lots of assets to their name.
Disadvantage of Jumbo Loans
Now that you are aware of the benefits of this loan, it is time to take a close look at the cons.
- High Interest Rates: While interest rates for jumbo loans are at a historic low, compared to traditional mortgages, jumbo loans have a high interest rate. Interest rate for jumbo loans is always 0.5 percent more than traditional mortgages, if not higher. This can make it difficult to pay the monthly installments if you get approved for the loan.
- Jumbo Loans are Difficult to Get: You would have to show the lender you have a large income and tons of assets to your name to get approved for a jumbo loan. You should be able to unequivocally show the underwriter you have the financial muscle to handle this kind of a loan besides having a high credit score. While the loan requirement in Irvine, CA varies from lender to lender, you can be certain the terms and conditions will be stricter compared to traditional home loans.
Now that you know the pros and cons of jumbo loans, it is time to perform some due diligence and see whether it makes sense for you to apply for this loan. Weigh the advantages and disadvantages carefully and make an informed decision.