Jumbo Loans
Jumbo Loan Overview
A jumbo loan is a mortgage used to finance properties that are too expensive for a conventional conforming loan. Designed to finance luxury properties and homes in highly competitive local real estate markets, jumbo mortgages come with unique underwriting requirements and tax implications.
What's Different About Jumbo Loans
The maximum amount for a conforming loan is $548,250 in most counties, as determined by the Federal Housing Finance Agency (FHFA). Jumbo loans are typically available with either a fixed interest rate or an adjustable rate, and they come with a variety of terms.
Unlike conventional mortgages, a jumbo loan is not eligible to be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac.
If you have your sights set on a home that costs close to half a million dollars or more—and you don’t have that much sitting in a bank account—you’re probably going to need a jumbo mortgage. There are much more stringent requirements that come with jumbo loans compared to conventional. This is because jumbo loans carry more credit risk for the lender.
Why Jumbo Loans?
Allows consumers to purchase a property that they would not be able to if they limited themselves to conforming loans.
Helps avoid having to break up the loan into multiple mortgages
May offer some unique loan features, including adjustable-rate and interest-only repayment terms that may not be available on a conforming loan.
Jumbo Loan Requirements
Homeowners must undergo more rigorous credit requirements than those applying for a conventional loan.
The DTI should be under 43% and preferably closer to 36%.
To get approved, you’ll need a stellar credit score—700 or above
You’ll need to prove you have accessible cash on hand to cover your payments, which are likely to be very high if you opt for a standard 30-year fixed-rate mortgage.