When you purchase a home, you will have a number of fees to pay. One of those could be something called private mortgage insurance. Private mortgage insurance (PMI) is insurance to protect your lender in the case that you default on the loan. Here is what you need to know about private mortgage insurance:
When to Consider Jumbo KC Home Loans
Jumbo KC home loans are typically used for large, single-family homes. Borrowers who seek jumbo mortgages are generally looking for high-end homes whose property prices exceed the conforming loan limits imposed by Fannie Mae and Freddie Mac.
Jumbo vs. Conforming KC Home Loans
Jumbo KC home loans and conventional loans are similar in many ways, but differ in a few important areas:
- The amount being financed is over the standard conventional limit of $417,000
- Credit score requirements are more stringent
- Interest rates are less competitive because of the associated risk
- No private mortgage insurance is required
The risk of financing a jumbo loan certainly outweighs that of a conventional loan because of the size of the mortgage. In many cases, jumbo KC home loans can range from $418,000 to millions of dollars. If multiple borrowers were to default on these loans, the mortgage company could be in serious financial trouble. Lenders charge a higher interest rate to make up for the risk when issuing these loans.
Requirements of Jumbo KC Home Loans
Although the underwriting process for jumbo mortgages is similar to the process for a conforming loan, the qualification requirements are different. If you are going to apply for a larger mortgage, you must be able to prove you have the income and assets to pay for it. Getting approved for jumbo KC home loans is usually much more challenging because of the following factors:
- Minimum down payment of 20% or more of the home’s value
- Minimum credit score of 700
- Maximum debt-to-income ratio of 45%
- At least 6-12 months’ worth of reserves in your bank account
If you are able to meet these requirements, it may be time to consider attaining a jumbo KC home loan.
When Jumbo KC Home Loans May Be The Right Choice
If you want to buy an expensive property, a jumbo loan is your most beneficial option. Using a jumbo loan allows you to:
- Borrow the money you need for a large house purchase
- Obtain one loan instead of two separate mortgages
- Avoid using your savings to buy a home
- Choose from a fixed or adjustable interest rate