A jumbo mortgage refers to a high-priced loan, usually meant for a luxury property. And while this loan may have once been reserved for the millionaire investors of the world, it may not be as exclusive as you think. If you're interested in what it takes to apply, it helps to understand how they work and who the best candidates are. 

A Moving Target 

To be considered for a jumbo loan, it must be above a certain minimum. However, this amount will differ based on where you purchase your home. The minimum for a jumbo loan in Beverly Hills will be much higher than the minimum in Kansas City due to the discrepancies between median home prices. These values will rise and fall depending on the local economy and average property appraisals, so buyers will need to do a little research into their city's criteria.  

Lender Terms 

Jumbo mortgages are available in a variety of options, similar to a conventional loan. Unsurprisingly, lenders tend to be a little pickier when it comes to who they approve and who they reject. A single application may go through several underwriters to arrive at the final answer. They're looking for exceptionally high credit scores and equally low debt-to-income ratios. 

It's the lender who dictates the exact terms of the loan, though historically, jumbo loans have had higher interest rates. However, it should be noted that this is not a hard-and-fast rule. Interest rates have been known to come down based on the caliber of people who apply. The more qualified applicants, the less overall risk the lender assumes. 

In addition, the jumbo mortgage minimum down payment has been relaxed to just 5% to allow a more level playing field (especially for people in high-priced markets). Despite this though, most lenders are still looking for at least 15% on a jumbo loan. Shopping around can make it easier to find a lender with reasonable terms for a jumbo loan. 

Structuring the Loan 

Adjustable-rate jumbo loans are available, but they are not the ideal choice for homeowners unless they know they'll be selling in the very near future. To avoid paying more interest than necessary, experts recommend a fixed-rate over 15 years.  

There may be a lot of fine print to a jumbo loan, but lenders are largely ensuring that the homeowner has enough in stable assets (e.g., property, savings, etc.) to cover their mortgage even if they fall on hard times. Knowing the terms can make it easier to prepare, apply, and be approved for the home of your dreams. 

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Let's face it – homebuyers often face intense pressure. In many instances, dozens of homebuyers may compete for the same residence. And if you don't act quickly, you risk missing out on your dream house to a rival homebuyer.

Believe it or not, it sometimes can be beneficial to take a wait and see approach to buying a house. Some of the key reasons for homebuyers to consider deploying a wait and see approach include:

1. You can determine exactly what you want in your dream house.

Differentiating between must-haves and wants can be tough, particularly for homebuyers who are shopping for residences for the first time. Fortunately, if you take a slow, gradual approach to homebuying, you can view a variety of residences and narrow your search accordingly.

Oftentimes, homebuyers can benefit from attending open houses and getting a firsthand look at myriad residences. Each open house provides an opportunity to analyze a home, review its pros and cons and determine whether a residence is right for you. As such, homebuyers can attend many open houses to better understand what they want from a dream residence.

2. You can get your finances in order.

Although you know you want to buy a house, getting your finances in order may prove to be hassle. Luckily, homebuyers who implement a wait and see approach can find a mortgage that matches their finances perfectly.

Ideally, a homebuyer should meet with several banks and credit unions and explore all of the mortgage options at his or her disposal. During each meeting with a mortgage lender, a homebuyer can receive expert insights into many mortgage options.

A homebuyer may want to get pre-approved for a mortgage as well. If a homebuyer embarks on a search for the right mortgage today, this individual can move closer to entering the housing market with a budget in hand and simplifying his or her home search.

3. You can find the perfect real estate agent.

Ultimately, the real estate agent that you select may dictate the success of your quest to find your dream residence. If you allocate the necessary time and resources to hire a hardworking and experienced real estate agent, you should have no trouble streamlining your home search. On the other hand, if you rush to hire the first real estate agent that you meet, you risk making the wrong choice.

When it comes to finding the perfect real estate agent, it pays to be patient. By spending some time learning about various real estate agents in your area, you can select a top-notch housing market professional to guide you along the homebuying journey.

Lastly, don't forget to select a real estate agent who is available to respond to any homebuying concerns and questions, at any time. With this housing market professional at your side, you can boost your chances of discovering your ideal residence.

There is no need to rush to find your dream home. Instead, take a wait and see approach to buying a house, and you may reap the benefits of your decision for years to come.

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