What is a Jumbo Loan
Jumbo loan is just another type of mortgage loan where a person in need of money can get amount on credit against some property. The difference is that this loan is comparatively much larger in size than normal mortgage loans and the dollars attached t it are higher than the rest. The amount of money that can be borrowed through Jumbo loan is much above the conventional loan limits. This type of loan is very common in the United States and is not sanctioned as easily as the other loans. These loans are non-conforming and are generally availed in cases of purchasing a house which often requires a large investment.
In order to qualify for Jumbo loans you must possess US citizenships along with an asset of high value which would be mortgaged against the loan. There are some other criteria too which must be checked well prior to availing this loan. This loan offers the maximum amount of money that you can avail through any other loan types. This is the only loan type that can help you in times of need of large fund.
Normally it has been observed that any loan amount that exceeds the value of $417,000 is termed as Jumbo loan all through USA except Hawaii, Alaska and the territories that are scattered along Virgin Islands. The costs and interest rates of Jumbo loans are markedly higher than the convention loans so as to reduce the risk factors that are often associated with loans.
The strategy used by the lenders in order to safeguard their interest is to offer high rate of interest at such loans which provide considerably large sum to the borrowers. The borrower availing such loans normally has to pay a higher rate of interest compared to the traditional loans. This strategy of charging high rate of interest on the sum borrowed often serves as the sole means of protection for the borrowers who are at high risks of defaulters.
The increasing rate of defaulters has made it mandatory for lenders to adopt means for their safety and the high rate of interest does help in the long run. It also brings down the possibility of defaulters and thereby keeps the lenders at safe hands. The problem for the lenders offering such loans is not just on the rising increase in the number of defaulters but also on the type of assets mortgaged.
Luxury homes mortgaged against Jumbo loans are often found to sit back for years as there are few buyers of such typical luxury homes. Refinancing of Jumbo loan thus becomes very difficult and the only option lenders are left with is foreclosure.