One major challenge most people face when getting the house of their dream is finance, especially if it’s a big house.
Either they can’t really afford the house expenses or the interest rate attached to the loan they want to get is too high, thereby making them give up.
This is why most people look out for opportunities like Super Jumbo Loan. With a Super Jumbo mortgage, you can get your dream house. This is because it can cover an above-average and high price tag that a regular loan will not cover.
According to Wikipedia, a Super Jumbo Mortgage is a residential mortgage. It offers the flexibility of borrowing with fewer restrictions. Also, it can finance primary residences, second or vacation homes, and investment properties.
In fact, Super Jumbo loans are a good option for you if you need a larger mortgage than the local limit for conforming loans and don’t have the cash flow to put down a larger down payment.
To understand the loan, rate, and loan limit, read this article to the end.
Meanwhile, before we continue, you can go through the table of content below for an overview of what to expect in this article.
Table of contents
What Is A Super Jumbo Loan?
A super jumbo loan is a mortgage for a large amount that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac and also has mortgage limits that surpass a “jumbo” loan classification.
Fannie Mae and Freddie Mac are government-sponsored organizations that provide liquidity to the housing market by buying mortgages from banks and private lenders, repackaging the loans, and then reselling them to other investors.
Furthermore, If a loan exceeds the current amount which is set at $510,400, it is considered a non-conforming loan, or jumbo loan.
Jumbo loans exceed the non-conforming threshold, but super jumbo mortgages go beyond jumbo mortgage limits.
How Does Super Jumbo Loan works?
Super Jumbo loans work differently than conventional mortgages. These loans have stricter requirements than other types of mortgages, and you’ll have to meet very specific property type, down payment, credit score and debt-to-income ratio requirements to get one.
However, It’s important to consider every requirement before you get a jumbo loan. Before we continue, let briefly explain the requirement on how the super jumbo mortgage works.
Property Type
Here, you can buy different properties with a super jumbo mortgage. As long as you meet your lender’s other requirements, there are no government restrictions on how you can use your loan.
You can use most super jumbo mortgages for primary residences, vacation houses, and investment properties.
Down Payment
Super jumbo loans typically have much higher down payment requirements compared to a traditional mortgage. It’s common to see lenders require 20% down on super Jumbo Mortgage for single-family units.
Also, you may need a higher down payment for second homes and multi-family units.
Credit Score
The credit score is a major factor in getting a super jumbo mortgage. Your credit score is a numerical rating of your reliability as a borrower. The score can range from 300 to 850 and several factors are evaluated to determine your credit score.
Debit To Income Ratio (DTI)
The debt-to-income (DTI) ratio examines how much money you earn versus how much debt you have. To find your DTI ratio, divide your required minimum monthly payments by the amount you earn before taxes.
For example, if you pay $1,000 a month in bills and you bring home $2,000 a month before taxes, your DTI ratio is 50%: $1,000 divided by $2,000.
A low DTI ratio is very important when getting a super jumbo loan because it tells lenders you will have enough cash flow to cover your mortgage payments.
Related Post: How to Get Out of Credit Card Debt in 2023
What Are The Requirements Of A Super Jumbo Mortgage?
Now you know that super jumbo mortgages are a substantial amount of money, they pose a high risk to lenders, so they do have strict requirements for a borrower to qualify.
Therefore, here are some requirements of a super jumbo mortgage.
- You will need to prove that your monthly income and assets can sustain the mortgage payments
- You must have good credit
- Also, Be aware that some lenders only approve super jumbo loans if the property is your primary residence
- You need to have at least a 10%-20% down payment
- It is necessary to note that interest rates tend to be higher if the amount borrowed is large, as is the case with super jumbo loans.
Super Jumbo Loan Rate
Super jumbo loans typically carry higher interest rates than conforming loans, because there’s greater risk involved in lending large amounts of money.
But, the Super Jumbo loan rate can vary dramatically, depending on your lender, finances, and down payment.
When mortgages are viewed as involving less risk, lenders may choose to offer rates that are in-line or even lower than conforming loan rates.
Today’s rates show that the difference between conforming and non-conforming loans ranges from 0.25% to 1%.
What is The Super Jumbo Loan Limit?
Fannie and Freddie set limits on how high your mortgage can be, called conforming loan limits. Mortgages that fall under the limit have insurance that protects the lender.
While “non-conforming loans” are sometimes called Jumbo or Super Jumbo loans because they go above this limit.
However, the loan limit is more strict and they vary by state and market. Recently, the limit for a single-family home was set at $548,250.
Any loan amount higher than this is considered a jumbo loan and will not be backed by Fannie Mae or Freddie Mac. The next level, which is a super jumbo loan, is for loan amounts over $1 million.
Benefits Of Super Jumbo Loan
Here are the some benefits of super Jumbo mortgage
- Super Jumbo Loans offer the flexibility of borrowing with fewer restrictions.
- They can be used to finance primary residences, second or vacation homes, and investment properties.
- When refinancing an existing home loan or consolidating multiple mortgages into a single loan, a super jumbo loan may be the right option.
Is A Super Jumbo Mortgage Right For You?
To know if this loan is right for you, you should first consider if you truly one. Remember, the loan limit I mentioned early is between $548,250 and $1 million in some areas.
So, if the property you’re interested in exceeds the limit for your area, see if making a higher down payment will make up for the difference.
But if you still require a higher loan amount, you must next consider your financials. These loans come with higher monthly payments. If you feel you can afford to make these higher payments comfortably, ensure you have a high credit score and low DTI.
A Super Jumbo loan can be the solution you need to pay for that perfect home.
Conclusion
If you are going for a high-priced home, and you are considering a super jumbo mortgage, It’s important to consider every requirement and your eligibility for a financing option that works best for you before you get the mortgage.
References
- rocketmortgage.com – What Are Jumbo Loans And How Do I Qualify For One?
- fmlon.com – Super Jumbo Loans
- investopedia.com – Jumbo Loan
- quickenLoans.com – Jumbo Loan: Definition, Rates, And Limits
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