Jumbo Loans

What designates a Jumbo Loan?


A loan is considered a jumbo if it exceeds the conforming loan limit. The current conforming loan limit for a single-family home is $484,350 for all states except for Hawaii and Alaska, where it is $726,525.  This loan limit is set by Fannie Mae and Freddie Mac.


Are jumbo loans harder to qualify for?


Qualifying for a jumbo loan generally requires lower debt to income ratios, higher credit scores, larger down payments and liquid reserves than average conforming loans. Jumbo loans often also carry higher interest rates compared to a conforming loan. Differences vary by lender, so our job is to find you the best rate with the least stringent qualifying criteria.


What are the options?


A jumbo loan is one potential way to buy a higher-priced home, but other options include:

  • Increasing your down payment. This is the simplest option. If you can put more cash towards the down payment, you will borrow less. This is especially the best option for you if the mortgage you are considering is only slightly above the conforming loan limit.
  • Obtaining two mortgages. This option is a bit more complicated. It requires you to take out a second, smaller mortgage at the same time as the first. By doing this, your first, larger mortgage would be below the loan limit, therefore avoiding the higher rates as well as a difficulty of obtaining a jumbo loan. However, the interest rate on a second mortgage is generally higher than on a first mortgage, so you’ll want to figure the costs and weigh the potential savings carefully. You also need to remember that you would be responsible for paying both mortgages each month.  You would need to be sure that you could manage the combined payment. Not everyone will be eligible or qualify for this loan option and it is no longer as easy to do this.

If you are considering a jumbo loan, set up an appointment with one of our Mortgage Loan Consultants. Together, you can discuss different scenarios to see if it makes sense for you to save for a larger down payment before you buy, get two loans, or take out a jumbo loan. Whatever option you choose, you should be confident that you will be able to comfortably afford the loan(s) you obtain. Understanding the full costs and terms of various loan options will help you make the best decision for your situation.