Jumbo Loan

Jumbo Loan

The limit in most U.S. counties is $417,000 for a single-family home, but many high-cost areas have a conforming loan limit of $625,500.

While interest rates are usually a bit higher for jumbo loans, they have actually been very competitive over the last two years, sometimes even lower than conforming loan rates.

Jumbo Loans

Jumbo Loan Qualifications


 

To qualify for a jumbo mortgage, you will need to demonstrate excellent credit, a substantial down payment (usually 20 to 40 percent), and high income.

  • High income. Luxury properties are more vulnerable to changing market conditions and jumbo loans have higher risk to lenders.
  • Low debt-to-income ratio. Your mortgage payment should be less than 38 percent of your gross monthly income.
  • Credit score of at least 720-760.
  • 20 to 30 percent down payment.
  • Not all properties qualify, as some lenders do not offer jumbo mortgages for vacation homes and investment properties.

Jumbo mortgages are subject to greater scrutiny than in the past. Under new mortgage laws enacted in 2014, not all jumbo loans qualify for Qualified Mortgage status, which protects lenders. This includes interest-only and balloon payment jumbo mortgages, which are now harder to find.

While fixed-rate jumbo loans are available, many jumbo mortgages are adjustable-rate loans. This is because banks keep these loans on their books, as they are too large to be sold to Fannie Mae or Freddie Mac. Interest rates on customer deposits -- which pay for the loans -- are at historic lows, so banks make a better profit on jumbo loans by offering an adjustable interest rate.

Jumbo Mortgage

Super Jumbo and Conforming Jumbo Loans

Some jumbo mortgages are called super jumbo mortgages, which means they are anywhere from $650,000 to $20 million or more. There is also a relatively new loan called a conforming jumbo loan, referring to loans which are between $417,001 and $625,500 for a conventional loan, or $417,001 and $729,750 for an FHA loan.

It is possible to avoid getting a jumbo mortgage by getting a first mortgage and second mortgage at the same time. If you choose to go this route, just make sure your combined rate is lower than the jumbo loan, and do not forget to consider closing costs for two loans.

Jumbo Mortgages

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