Chris O'Shea
When it comes to buying a home, the more you know, the better. With that in mind, let’s take a look at conventional mortgages versus jumbo mortgages. While they’re both used for the same purpose — securing a home — they have several key differences. Here’s what you should know.
Conventional Mortgage
A conventional mortgage is what the average homebuyer gets. It is issued by a bank, credit union, or mortgage company and typically backed by Fannie Mae or Freddie Mac. Conventional mortgages are typically easier to qualify for than jumbo mortgages because they are less expensive and the lender can sell it to Fannie Mae or Freddie Mac. This means there’s less risk involved for the lender. To get a conventional mortgage, you’ll need a low debt-to-income ratio, a down payment, a good credit score, and a certain level of income.
Jumbo Mortgage
A jumbo mortgage is for securing a high-priced home, typically anything $750,000 and up. Because jumbo loans are so big, they are not backed by Fannie Mae or Freddie Mac. That means it is often much harder to qualify for a jumbo mortgage. Compared to conventional mortgages, to get a jumbo loan, you must make a bigger down payment, have a lower DTI ratio, have a higher source of income, and have a high credit score.
Do One Thing: Before applying for a mortgage (either kind), make sure your credit score is as high as possible. The higher your credit score, the better loan terms you’ll be offered.
