Jumbo Mortgages

Jumbo Mortgages

In most areas of the United States, the limit for a conforming mortgage is $417,000 on a single family home. A number of high-cost counties like New York and Los Angeles counties have a conforming limit of $625,500.

When you want to buy a home and need a larger mortgage, a jumbo loan is the solution. Jumbo loans, in a normal market, have slightly higher interest rates than conforming loans, although they make it possible to buy your dream home with a single mortgage.

Jumbo Loans

Qualifying for a Jumbo Loan

To get approved for a jumbo home loan, you will need sufficient income, excellent credit, and a fairly large down payment. The following are general qualifications to meet.

  • 20-30% down payment may be required.
  • High income to afford payments. This is because luxury real estate is especially vulnerable to changes in the market and jumbo mortgages have a higher risk for lenders.
  • Low debt-to-income ratio. Your new mortgage payment and debt obligations should not exceed 38% of your before-tax monthly income.
  • FICO score of 720 to 760.
  • The property must also qualify for the loan. Some lenders do not allow jumbo loans on investment properties and second homes.

When you apply for a jumbo mortgage, bear in mind that these loans face more scrutiny than in the past. New mortgage laws mean that not all jumbo home loans will be considered a Qualified Mortgage, a designation that offers protection to lenders. These new rules make balloon payment and interest only jumbo loans much harder to obtain.

Jumbo Mortgage

Most jumbo mortgages today are adjustable rate mortgages, although it is possible to find fixed rate loans as well. The reason for this is lenders keep jumbo loans on their books because they exceed the limit for loans that can be purchased for Freddie Mac and Fannie Mae. Interest rates for customer deposits which pay for jumbo mortgages remain very low, which means banks make more profit on jumbo loans that have an adjustable rate.

Difference Between Jumbo and Conforming Mortgage

Very large jumbo loans are known as super jumbo mortgages. This classification of loan can be between $650,000 to $20+ million. You may also be interested in what is called a conforming jumbo mortgage, which is a loan between $417,001 and $625,000 for a conventional mortgage, or $417,001 and $729,750 for an FHA jumbo loan.

While there are ways to avoid taking out a jumbo mortgage, a jumbo loan is usually the best way to get the lowest interest rate and avoid paying closing costs more than once.

Jumbo Mortgages

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