What’s the difference between a jumbo loan and a conventional loan?
The major difference between a conventional loan and a jumbo loan is that conventional loans are limited to dollar amount set by Fannie Mae; Jumbo loans are loans of any amount above that limit. See below for more details…
Conventional loans are probably the most common type of mortgage loan. Conventional loan qualification is determined based on income, employment history, debt, and credit score. There are also conventional loan limits. In Oregon, it is currently $484,350 in most areas. Generally, conventional loans require at least a 3-5% down payment. Additionally, if your down payment is less than 20%, you will be required to pay private mortgage insurance (PMI) until you reach at least 20% equity. PMI insures the lender in case of default. Once you reach 80% equity, the PMI goes away.
Jumbo loans are very similar to conventional loans but the criteria for qualifying is stricter because they don’t have the loan limits that conventional mortgages do. In Oregon, any loan over $484,350 is considered a “jumbo” loan. Qualification for a jumbo loan uses the same criteria as conventional loans, but usually requires a higher down payment, income, and credit score due to the higher amount of money being loaned.
Have more questions, or want a referral to a good lender? Contact us, and we’ll be happy to help you!