What Is a Jumbo Loan?

House sale sign
Photo by rawpixel.com from Pexels

As one of the leading mortgage brokers for the Illinois market, Nicholas P. Lambrinatos and his reputable firm, Great Rate Mortgage, specialize in over a dozen types of home loans. Nicholas P. “Nick” or “Niko” Lambrinatos works with first-time home buyers to secure mortgages of all sizes, from zero-down VA loans to jumbo loans for costly properties.

Nearly half of American mortgages are backed by the government entities Fannie Mae and Freddie Mac. However, these programs have set loan limits. The limit varies, based on average home prices, but state limits range between $453,100 and $679,650.

Jumbo loans are ideal for buyers who want properties that exceed government limits but would prefer to manage one home loan. To qualify for a jumbo loan, home buyers must have an excellent credit score, low debt-to-income ratio, and a cash or liquid asset reserve that could cover the mortgage for at least six months.

While some buyers put down 10 percent, most jumbo mortgage lenders prefer a 20-percent down payment. However, many jumbo loans are not subjected to private mortgage insurance, even with a low down payment.

Budgeting Considerations for First-Time Homeowners

Home keys and minature house
Photo by Tierra Mallorca on Unsplash

Nicholas (“Niko” or “Nick”) P. Lambrinatos is a longtime Illinois real estate executive who guides Great Rate Mortgage and provides client-driven solutions to those seeking quality homes. A particular focus for Nicholas P. Lambrinatos is on helping first-time home buyers apply for and secure loans.

One major concern of those new to homeownership is affording the monthly costs associated with their purchase. In addition to mortgage payments, common expenses include taxes, insurance, and HOA fees. As a rule of thumb, these combined expenses should not exceed 25 percent of the family’s take-home pay each month.

For a family that brings home $5,000 each month, the maximum house payment should be around $1,250. With a 10-percent down payment and a 4-percent fixed interest rate on a 15-year mortgage, the affordable price of a home for this family is around $188,000. With taxes and insurance adding another $200-$300 a month, the buying price ideally should be somewhat lower than this high-water mark.

However, family circumstances change over time. If one or more of the breadwinners has a stable job with a promotion track, it may make sense to take on a slightly larger mortgage.