A Jumbo Mortgage is required when the loan amount exceeds the current conforming loan limits. As of 2017, the highest conforming loan amount (set annually by the Federal Housing Finance Agency (FHFA)) can vary by county, In Michigan, Florida, Ohio, and Texas it is $424,100. In California, the limits go as high as $636150. Any loan amount above the limit set by FHFA is normally called a Jumbo Loan.
Unlike loans that have the terms dictated by the government, Jumbo loan limits are determined by Mortgage 1 underwriters. The variations on jumbo loans can be substantial when compared to conventional lending.
Many borrowers at this level can have complicated income situations, including self-employment and substantial investment income. Conventional lending normally will require more paperwork with borrowers that have that type of income. Jumbo loans can be less cumbersome from a paperwork perspective. It is not uncommon for multiple appraisals to be needed when the purchase price is seven figures. Two appraisals are often required when the home purchase a home that is more than $1 million.
How do the loan rates compare to conventional mortgage rates?
Jumbo mortgage rates are very similar with conventional 30-year fixed rates. As with all lending, the interest rate the consumer pays has more to do with the strength of the borrower’s financial profile. There are several components lenders pay close attention to when evaluating a jumbo mortgage application.
Jumbo loan applicants should have great credit and a score above 720, and a low debt-to-income ratio preferably less than 40%. Jumbo applicants typically have significant reserves and liquid assets. If the Jumbo borrower has other investments or properties, the lender will want to evaluate any monthly payments on those types of investments, as well.
What is jumbo loan down payment requirements? How are they different from regular loans?
Most jumbo loans require 20% down for primary residences, some programs can require less than that depending on other factors.