Is jumbo loan the right option for me? You might be asking this question to yourself for quite some time now. Whether you are eyeing to move to a competitive location or fulfilling your dream to have a luxury home, a jumbo loan is a stepping stone to turn this dream into reality.
But judging from the term itself, jumbo loans in texas will also require a massive amount of money, tedious application, and stricter requirements.
Acquiring a jumbo mortgage is a great start in achieving your dreams. However, it can all crash down in a snap if you fail to do your homework of research and evaluating if this is the right option for you.
Just like any other loan, a jumbo loan also has its highlights and drawbacks. In this article, we will discuss its pros and cons to help you decide to jump on this enormous responsibility.
Pros of jumbo loans
Money is never an issue
A jumbo loan will give you all the money that you need to have that 4-story 8-bedroom house and lot that you always dream of. It will allow you to process a one-time big-time loan instead of getting two different loans to finance your needs. The limit of jumbo loans in texas will also help you maintain your savings or cash on hand for other financial needs.
Flexible loan terms
Compared to other conforming loans, this option allows you to choose from a variety of loan programs with different terms. You can freely select which one will suit your financial capability and long term goals. Some lenders allow you to enjoy a 30-year fixed-rate loan, while others offer to have an adjustable-rate over the years. A jumbo loan will give you freedom in terms of loan terms flexibility.
Cons of jumbo loans
Higher interest rate
A jumbo loan will have a higher interest rate, which may hurt your budget. Since this type of mortgage involves a lot of money, the lenders are taking more risk, which leads them to implement an interest rate of roughly .5 percent higher than a traditional mortgage.
You will have to provide substantial documents that can prove you can pay for this type of mortgage. You have to have a credit score of 700 and above, a considerable amount of income, and tons of supporting documents like a bank statement and government forms. You also have to prepare sufficient cash on hand that can cover at least six months of your mortgage.
It is more expensive than you think
Starting with the big chunk of down payment. If you enjoy at least three to five percent down payment fee on conventional type loan, with jumbo loan in Texas, a whopping 10 to 20 percent down payment is expected.
Every financial decision will always have an advantage and disadvantage. Just make sure to do your homework and carefully weigh the pros and cons of the choice you will make.