Overview: What Is A Jumbo
A jumbo loan is a special kind of mortgage for particularly expensive homes. The specific dollar amount varies by state and county and is determined each year by the Federal Housing Finance Agency which, among other things, oversees Fannie Mae and Freddie Mac. Generally, however, a jumbo loan applies to homes selling for a half-million dollars or more. Sometimes substantially more.
For those of us unlikely to be purchasing a multi-million-dollar home this year, it’s easy to assume anyone in that sort of income range could just as easily pay cash for their home – or homes – and avoid the headaches and costs of financing. Not everyone able to reasonably consider an expensive home has unlimited resources, however, and even those who could conceivably simply write that check may wish to protect their savings and maintain some financial flexibility along the way.
The financial industry even has an acronym for the sort of borrowers most likely to take out a jumbo home loan. It’s HENRY – High Earners; Not Rich Yet. These are folks who are doing quite well for themselves and who by all indications will accumulate wealth rapidly over the years, but who haven’t entirely “arrived” just yet. They’re still working, or investing, or otherwise stoking the fires of opulence. They may have substantial savings and a great retirement package already set up. At some point, they decide to purchase the sort of home the represents where they’re going as much as where they are. What sort of folks need a jumbo mortgage? HENRY.
There are, of course, many different reasons someone might apply for a jumbo mortgage loan. It is nevertheless not the easiest loan to secure or the first option most homebuyers are likely to consider. You should always explore all of your options before committing to a specific mortgage or any other sort of loan, but this is particularly important when it comes to jumbo loans.