What is a Jumbo Loan?

When you’re shopping for houses for sale in Charlotte, NC and you need to finance more than the maximum amount that’s considered a “conforming loan” by Fannie Mae and Freddie Mac, you’re looking at a jumbo loan.

But what is a jumbo loan, and how is it any different from a regular mortgage loan?

What is a Jumbo Loan?

A jumbo mortgage is simply a mortgage that doesn’t conform to the Fannie Mae and Freddie Mac guidelines for what they’ll buy from lenders. The two agencies will only buy loans under a certain amount of money—both programs are set up to give lenders liquidity so they can, in turn, create more mortgages.

The conforming loan size limit for the Charlotte area market is $453,100, but there are exceptions for loans as high as $625,500 in higher priced markets.

How is a Jumbo Loan Different From a Conforming Loan?

A jumbo loan is larger than a conforming loan, but other than that, the application and qualification process is typically the same. You’ll still need to show a good credit history, come up with a down payment, and prove your debt-to-income ratio to the lender.

There are a few differences between the two types of loans, though. One is that the lender will typically want to see that you have 12 months of reserves after closing, and often they want to see half of it liquid (such as in your checking or savings account) and half in your retirement assets.

Other differences can, but don’t always, include:

A higher debt-to-income ratio
More flexible income calculations
A down payment of less than 20 percent with no private mortgage insurance

Are You Buying a Home in Charlotte?

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What is a Jumbo Loan?