Jumbo

Loans

A Jumbo Loan, also known as a jumbo mortgage and non-conforming conventional mortgage, is a loan that exceeds the maximum amount for a traditional conforming loan set by the Federal Housing Finance Agency. Jumbo mortgages were created for financing luxury properties and high value homes. This max limit is adjusted every year by the Federal Housing Finance Agency (FHFA), and as of 2022 is $647,200. Jumbo loans are considerably riskier for the loaner as Fannie Mae and Freddie Mac do not protect them if the borrower defaults. For this reason many banks and lenders do not provide options for Jumbo mortgages.

Where a jumbo loan starts after exceeding the conforming loan limit of $647,200 a super jumbo loan starts after exceeding the jumbo loan limit of $1,000,000. Other than the limit, jumbo loans and super jumbo loans act the same way.

As a general rule of thumb, most jumbo loans come with the expectation of a 10% down payment. Some lenders may even require a minimum down payment of 25%, or even 30%. But we require a minimum down payment of 5%. And you are free to make an even larger down payment if you choose. With a larger down payment, your total loan will be smaller and your monthly mortgage payments will be lower as well.

Jumbo loan interest rates are similar to regular interest rates in many ways. They can come with a fixed or adjustable interest rate, and the terms vary depending on the lender. While many would assume that jumbo mortgage loans have a higher interest rate because of the size of the loan that is not necessarily true. Jumbo loans interest rates are adjusted based on the lender’s analysis of the risks involved. The lower the risk, the lower the interest rate.

The requirements to get a jumbo mortgage loan vary from lender to lender, but some safe rules to follow to quality for one are:

• Have a low-debt-to-income (DTI) ratio. While many people assume that you need to make within a certain bracket amount of money to take out a jumbo mortgage, the better goal is to have a low DTI. This shows that you do not have a lot of debts you are already paying compared to your income, and is a good indicator that you can make your monthly payments.
• Have a high credit score. Most lenders will expect you to have a credit score around 720 before considering you for a jumbo mortgage. However, if you fit the other criteria your lender may be willing to make an exception for your lower credit score.
• Have liquid assists and cash reserves. It is very common for lenders to ask for jumbo loan borrowers to prove that they can make the first year of payments. Lenders also want to be sure that potential borrowers can make the down payment which is between 10%-20% down.
• Have documentation to prove your financial health. Because lenders take a big risk with jumbo loans as they are not protected by Fannie Mae and Freddie Mac if the borrower defaults, many lenders will ask to see documentation of your W-2s, full tax returns, and information on your other investments for proof of your financial reliability.

Jumbo loans have a higher down payment, making it less likely that you will have to pay PMI on the Jumbo loans. Other lenders may still require a PMI, but we don’t require a PMI for any of our Jumbo loans.

One of the other top benefits of a Jumbo loan, aside from no PMI required, is that you will be able to get more home for your money, more than you would get with a Conventional or other loan type. Additionally, you will also have a lot more flexibility with the loan terms with a Jumbo loan. Depending on your needs, you will be able to choose between a fixed-rate or adjustable-rate mortgage, and a 15 or 30-year mortgage. We are ready to work with you to determine what kind of loan program is right for you.