Jumbo Loans

Jumbo Loans

What is a Jumbo Loan?

A jumbo loan is a home loan greater than the conforming loan ceiling. These ceilings are enforced by the Fannie Mae and Freddie Mac programs. These two government sponsored programs buy foreclosed mortgages from lenders and banks and try to resell the homes under their guidelines. The limits for jumbo loans consist of $417,000 and $625,500. It is only in high cost areas that the $625,500 applies.

For the most part, the interest rates for jumbo loans are much higher than any other type of loan. Just recently over the last couple of years, the interest rate on jumbo loans have been competitive or even lower than most conforming loans. Because of the higher loan amount, jumbo mortgage loans are a riskier product for lenders. Jumbo loans also tend to have a higher down payment needed, but having one loan may outweigh the benefits of having to take out two loans for the purchase. Closing costs for two loans may also cost more than taking out a jumbo loan from the start.

Jumbo Loans

Jumbo Loan Qualifications

Those who qualify for jumbo loans are those who exhibit a flawless credit report and high income. Usually, a lender will require at least 20-40% as a down payment on the home.

Qualifications for Jumbo Loans are as follows:

  • High income. Luxury properties are more vulnerable to changing market conditions and jumbo loans have higher risk to lenders.
  • Credit score of at least 720-760.
  • Low debt-to-income ratio. Your mortgage payment should be less than 38% of your gross monthly income.
  • 20-30% down payment.

Keep in mind, not all properties will be able to qualify for this program. Some lenders will not even offer a jumbo loan for vacation or investment properties because of personal risk. Because of new laws passed in 2014, not all jumbo loans can qualify. These include interest only and balloon payment loans. These loans are much harder to find these days since the passing of the 2014 law from the Obama Administration. These laws protect the lender from any default on the home.

Jumbo Loan

Super and Conforming Jumbo Loan Limit

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.

Jumbo Loan Qualifications
 
 
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