Hi, I’m Sophia Sanchez, Tampa Real Estate Broker with Rob DiGiore from Guild Mortgage. We’ll talk about the differences between Jumbo Financing and Conventional Financing and what that means if you are buying a luxury property.
A Jumbo Loan is a loan that is one dollar or more over the conventional loan limit. The Conventional Loan limit changes each year. With Jumbo Loans, sometimes the investors are a little more restrictive on their guidelines, so they might tighten up the credit scores that they will lend to. They also may require more reserves, which is money left over after you have a down payment and settlement cost. For 2020, the Conventional Loan limit in Hillsborough County and most of Florida is $510,400. They don’t usually use round numbers, and it tends to always be a funky number like that.
There is much more lending flexibility for Conventional Loans, and the debt-to-income ratios are allowed to be much more flexible. So, when you have a jumbo listing or clients needing a Jumbo Loan, you have to remember the requirements for a Jumbo Loan because getting approved for the loan could be more challenging.
There are a couple of workarounds to avoid getting a Jumbo Loan. We’re seeing many people doing a first mortgage up to $510,400 and a second mortgage on top of that. This is called a Piggyback Loan, and they close all at the same time. It allows clients to still have those conventional guidelines and the flexibility not to have the restrictions of a Jumbo Loan.
Sometimes Jumbo Loans have better rates than Conventional Loans, but most of the time, they’re higher than Conventional Loan rates. That’s why you’re seeing clients want a Conventional Loan right now.
If you have questions about Jumbo or Conventional financing, please drop us a message below, and we’ll get back in touch with you as quickly as possible.