Do rich people take out loans? If they’re making huge money, why would they even be borrowing, right?
But, even millionaires don’t want to use all their savings in a luxurious house, although they can very well afford to. So, what do they do instead?
They take out loans, and big — or rather, JUMBO — ones, much like other home buyers. In case you need to brush up on jumbo loans, sites like LoansByJacinda.com can help you. Judging from the name, you know they aren’t offering amounts the size of a peanut, and you know they aren’t a big problem for guys with big bucks, either. Here’s why.
Jumbo Loans are for Buying Luxury Homes
A loan that goes beyond the $417,000 limit is a jumbo. It’s a type of mortgage marketed specifically to those who intend to buy properties around and above the $500,000 range, AKA, luxury homes.
Jumbos used to be quite relaxed when it comes to the application and approval process. Starting in 2007, however, the game changed, and those who really intend to buy a pricey primary residence are the ones eligible to apply for it. This means they have to prove that they’re, indeed, living in the property after the purchase…
Jumbo Loans are for Those with Good Credit
…and that they can afford to pay it back. Imagine lending half a million dollars without having a guarantee of getting the amount back. This is another requirement added not very long ago, to enforce stricter parameters on the applicants. A 20% down payment is steep for a six-figure loan, and to get an approval, you need a credit score that reflects your ability to pay the amount off.
As such, it isn’t for lousy or cash-strapped borrowers.
Jumbo Loans are Generally Nicer to High Earners
Huge loans come with huge interest rates, and that was true for jumbos, until the tables turned a few years ago. They now have rates around 0.25% lower than those of conventional loans, which make them even sweeter deals for a high-earning market.
In addition, they tend to loosen the 20% down payment requirement for Henrys, AKA, “high earners, not rich yet,” which, of course, encourages them to stay high-earning, and become rich, eventually.
Jumbos serve the rich and those who’re about to be rich. They’re not peanuts, but they’re not boulders for their chosen market, either. And, that’s why they don’t spell big trouble for guys with big bucks.