Everything You Need to Know about a Jumbo Loan

With home prices rising quickly in parts of the country, buyers are turning to jumbo loans to finance their new homes. “Jumbo” refers to loan amounts that are higher than the FHFA conforming loan limits for conventional financing based on the property’s county. They are referred to as non-conforming loans.

What are the Loan Limits?

As of 2022, the typical conforming loan limit for a one-unit property is $647,200, except in certain higher-priced counties, where the conforming high-balance loan limit may be as high as $970,800.

The maximum amount that you can borrow varies greatly among different lenders. This is partly because jumbo loans are written with both fixed- and adjustable-rate mortgages and can be used for primary homes, second homes, or investment properties.

Qualifying for a Jumbo Mortgage

Jumbo loans have tighter underwriting guidelines.  These loans are designed for borrowers with established credit and that have the ability to meet a higher level of capacity and ability to repay. These loans are manually evaluated and must meet stricter guidelines related to items such as:

  • Minimum tradelines and history for established credit
  • Higher income to support ability and willingness to repay
  • Higher credit scores starting with minimums of 660 or more (based on number of units and LTV)
  • Higher asset requirements for reserves

If you have a lower credit score, you’ll have to show a correspondingly low debt-to-income ratio to prove your creditworthiness. Also, plan on a higher down payment (based on credit score, number of units, and LTV) to avoid higher interest rates.

Main Benefits of Jumbo Loans

The main upside for borrowers is the ability to get a competitive interest rate on the home of their choice, regardless of the mortgage amount. In fact, since many jumbo mortgages have adjustable rates, they can be lower (or higher) than a conforming loan. For example, one recent 30-year jumbo mortgage carried a rate of 4.62 percent–8 basis points lower than the conventional fixed rate of 4.71 percent.

If you prefer to finance more of the cost of your home, a jumbo mortgage from the Mortgage Investors Group could be just what you’re looking for. Contact us today for more information.