Understanding Jumbo Construction Loans

If you’re ready to build the home of your dreams, it’s important that you search early on for home financing with a great rate and terms. If you are building a high-value home, you’ll need a jumbo construction loan. These loans exceed loan limits set by government-sponsored entities (GSEs) Fannie Mae and Freddie Mac, which is why they’re known as nonconforming or jumbo loans. Read on to learn more about jumbo construction loans and contact First Financial Bank – Bill Lavelle for a free quote about homes in Columbus, Dublin, Powell, or Cleveland, OH.

Jumbo Construction Loan Basics

Jumbo construction loans are portfolio loans; that is, they’re kept on a lender’s books rather than being purchased and repackaged by GSEs. This matters to you because these lenders carry more risk by keeping jumbo construction loans on their books, which means you may have to submit a larger down payment (of at least 20% or more) and may have a higher interest rate.

In Franklin, Delaware, and Union Counties, OH, the lending limits for conforming construction loans are:

  • $345,000 for a single-family home
  • $441,650 for a two-family home
  • $533,850 for a three-family home
  • $663,450 for a four-family home

In Cuyahoga County, the limits are:

  • $294,515 for a single-family home
  • $377,075 for a two-family home
  • $455,800 for a three-family home
  • $566,425 for a four-family

To obtain a jumbo construction loan, your lender will carefully evaluate the plans for the build of your home, which your contractor should be able to supply. Your lender will approve the contractor and the plans before you can proceed with construction. The lender will give out funds for the build of the home over time as needed.

Types of Jumbo Construction Loans

It’s important to note that there are two main types of construction loans: Construction-to-permanent and stand-alone construction. If you get a stand-alone jumbo construction loan, you will need to take out a second, “regular” jumbo mortgage once the construction is complete. With construction-to-permanent loans, in which you secure financing to build a home, then that loan transfers seamlessly into a regular jumbo mortgage once construction is complete.

Many borrowers with jumbo construction loans choose adjustable-rate mortgages (ARMs), then choose to refinance to lower-rate conventional loans in a few years. Others, still, choose a fixed-rate mortgage up front. Bill Lavelle will look at your financial goals and help you determine which makes sense for your needs.

It Takes a Team

If you’d like to learn more about jumbo construction loans, First Financial Bank – Bill Lavelle is here to help. Bill has local connections with contractors and other professionals who can help you start the journey to build a home. Bill works with several top national lenders to offer the most competitive rates, even for jumbo construction loans, to clients in Columbus, Dublin, Powell, and Cleveland, OH. Contact us when you’re ready to learn more.