In a housing market with increasing home prices, we finally have some good news… FHFA has increased the conforming loan limit to $766,550! This is almost a $40,000 increase from last year’s limit. This will allow more home buyers to get a conventional mortgage rather than having to go with a more expensive and restrictive jumbo mortgage option. Continue reading to learn about the benefits of a conventional mortgage compared to a jumbo mortgage.
Competitive Interest Rates
Since jumbo loans are typically higher loan amounts than what is normal for the area, they typically result in higher interest rates. Conventional mortgages will have lower interest rates making the payments more budget friendly.
Down payment requirements
Conventional mortgages typically require a 5% down payment (some options require as little as 3%). Most jumbo loans require a 10-20% down payment. The lower down payment can result in tens of thousands of dollars left in buyer’s bank accounts.
Since jumbo loans are higher risk mortgage, the criteria to qualify are often more stringent. Most often, you will need a higher credit score and lower debt-to-income ratio than what is required to qualify for a conventional mortgage.
As you can see, due to the increased loan limit of $766,550 there will be more purchase options for buyers by allowing them to qualify for a conforming mortgage rather than a jumbo mortgage. Ultimately, your decision should be based on a thorough assessment of your financial position and the specific requirements of the property you wish to purchase.
Consulting with a mortgage professional can also provide valuable insights and guidance as you navigate the complex landscape of home financing. For a better assessment of your options, please call Andy Schoemehl at 314-221-7797.