High-Balance Loan: Option for Expensive Homes
A high-balance loan, also known as a jumbo loan, is a mortgage that exceeds the conforming loan limit set by the Federal Housing Finance Agency (FHFA). This limit varies based on the average home price in a particular area and is updated annually. High-balance loans tend to be more expensive than conforming loans because lenders view them as higher risk. This is due to the larger loan amount and potentially higher debt-to-income ratio of the borrower. As a result, high-balance loans often have higher interest rates and may require a larger down payment.
To qualify for a high-balance loan, you must have a good credit score, a low debt-to-income ratio, and a stable income. Lenders may also require a larger down payment and additional documentation to prove your ability to repay the loan. These loans can be used to finance the purchase of a primary residence, a second home, or an investment property. However, they may not be available in all areas or offered by all lenders. It is important to compare rates from multiple lenders to find the best deal on a high-balance loan.
- Exceed FHFA loan limits
- Conforming jumbo loans
- Higher interest rates
- Stricter underwriting
- Higher risk to lender
- Suitable for expensive homes
- May require larger down payment
- Tougher qualifying criteria for borrowers
High-balance mortgages allow borrowers to finance expensive homes, but come with higher interest rates and stricter qualifying criteria to mitigate the increased risk to the lender.
