Conventional vs. Jumbo Loans (What you really need to know)

When it comes to buying property, understanding your loan options can make all the difference. Two of the most common options? Conventional loans and jumbo loans.

Conventional Loans

These are the most common type of mortgage, typically backed by Fannie Mae or Freddie Mac. These loans conform to specific lending limits, which vary by location and year. If your loan amount falls under that limit, you’re likely dealing with a conventional loan. These tend to offer competitive interest rates and are often easier to sell to investors, making them a great option for many buyers. However, you’ll usually need a credit score of at least 620, and if you put down less than 20%, you’ll pay private mortgage insurance (PMI) until you reach 20% equity.

Jumbo Loans

These on the other hand are for homes that exceed that conventional loan limit, something that’s not uncommon around Bear Lake, especially with luxury or waterfront properties. Because these loans are larger and not backed by Fannie Mae or Freddie Mac, lenders take on more risk. That means stricter qualification standards like: higher credit scores (typically 700+), lower debt-to-income ratios, and larger down payments (often 20% or more). The tradeoff is that jumbo loans allow you to finance your dream property without needing to split it into multiple smaller loans.

It’s important to note that interest rates for jumbo loans used to be higher than conventional ones, but in recent years the gap has narrowed, and sometimes, jumbo loans even have similar or better rates for well-qualified buyers.

Have questions or want to learn more about what getting a loan for your Bear Lake getaway looks like? Reply to this email or give me a call any time and let’s chat!