When obtaining a home loan, you’ll receive two important documents from your lender: a loan estimate and a closing disclosure. On the surface, these documents are very similar, but they both serve different purposes. Here’s what you need to know about the differences between these two forms and what each means for you:
Jumbo vs. Conforming Kansas City Home Loans
It’s easy to get overwhelmed by the sheer number of home loan types in the real estate business. One of the most referenced Kansas City home loans is a conforming loan, or a loan that conforms to Freddie Mac or Fannie Mae guidelines. The alternative to a conforming loan is a non-conforming, or “jumbo,” loan, which is only a good idea if you wish to exceed a conforming loan’s loan limit.
Loan Limits for Conforming Kansas City Home Loans
While the guidelines from Freddie Mac and Fannie Mae cover a variety of subjects, the most obvious difference between conforming and jumbo loans is that conforming Kansas City home loans have a loan limit. A loan limit means that the loan can not exceed a certain amount for it to qualify as a conforming loan.
While national and local limits have fluctuated since the mortgage crisis, it has recently settled around $400,000. If your loan meets the current loan limit, it is more likely to be bought by the secondary mortgage market, which is beneficial to lenders and the real estate market. Therefore, jumbo loans are not as easily approved.
Risk Levels for Jumbo and Conforming Loans
Since jumbo loans are not guaranteed by government-sponsored organizations, they have a higher risk than conforming Kansas City home loans. For this reason, jumbo loans typically:
- Have a higher mortgage rate
- Have a higher down payment
- Are harder to qualify for
This last point means that even if you have fantastic credit, assets, and income, lenders still may not be able to give you a jumbo loan. Due to the large risk of jumbo loans, some lenders may only approve a certain number of loans at any given time or may simply not take on jumbo loans at all.