Jumbo mortgages are large loans that fall above the federal loan limit. These loans are typically harder to qualify for than conforming loans, but they can offer competitive interest rates. They're also a convenient way for borrowers to secure the money they need to purchase expensive homes.
You'll need a good credit score
Before lending you hundreds of thousands of dollars, lenders want to know you're financially responsible. You'll need a higher credit score to qualify for a jumbo loan than you would for a conforming loan — probably at least 700.
You'll usually need a credit score of at least: 700, to get a jumbo loan for a one- or two-unit property with a loan limit up to $1 million. 720, for loans between $1 million and $1.5 million. 740, for loans between $1.5 million and $2 million.
Jumbo loans don't take more or less time to approve as compared to other loan types. Most mortgage lenders can close a jumbo loan in 3 weeks or fewer.
As a general rule of thumb, you can expect to make a down payment of at least 10% on your jumbo loan. Some lenders may require a minimum down payment of 25%, or even 30%. While a 20% down payment is a good benchmark, it's always best to talk to your lender about all options.
Jumbo loans are now available from some mortgage lenders with as little as 5 or 10 percent down. Others may require 15 to 20 percent.
In 2021, the conforming loan limit is $548,250 in most counties in the U.S., and $822,375 in higher-cost areas. Any mortgage over these amounts is considered a jumbo loan.
Max debt-to-income ratio (DTI) for jumbo loans is usually 43% Your DTI is the percentage of your monthly earnings used to pay off all debt obligations and it's used by lenders to determine how large of a monthly mortgage payment you can handle.
Any loan that exceeds $970,800 is considered a jumbo loan. Individual counties such as Solano County and San Joaquin county have lower jumbo loan limits.
The California Conforming loan Limit in 2020 was $510,400 and in some high-cost counties, like Los Angeles, Orange, San Mateo, and Alameda) it was as high as $765,600.
To conform to Fannie Mae and Freddie Mac standards, there are what's called conforming jumbo loans. They're above the $417,000 conforming loan limit, but under the county limit in areas deemed high-priced by the federal government. A lower credit score of around 660 is needed to get the loan, Saling says.
What is the Jumbo Loan Limit in 2022? In 2022, any loan exceeding $647,200 falls under the jumbo category. However, there are exceptions in certain counties within California. If you live in a high-cost county, the 2022 California conforming loan limits are higher.
The agency-set maximum limits for these loans provide a baseline for jumbo loans. ... For 2022, the Federal Housing Finance Agency raised the maximum conforming loan limit for a single-family property from $548,250 (in 2021) to $647,200.
Does it typically take longer to close a jumbo loan? Typically it does not take any longer to close on a jumbo loan.
Jumbo loans offer the flexibility of either a 20% down payment or a lower down payment with private mortgage insurance (PMI). That can mean significant savings upfront with various options depending on your income, credit history, budget, and other qualifying factors.
Taking out a jumbo mortgage doesn't immediately mean higher interest rates. In fact, jumbo mortgage rates are often competitive and may be lower than conforming mortgage rates. ... But, if lenders are able to provide jumbo mortgages, they'll usually keep their rates competitive.
Jumbo Loans Tend to Be More Expensive
And that means mortgage rates on jumbo loans will be higher – how much higher depends on the market. If investor demand for jumbos is strong, the rate spread may be narrow, and vice versa.
FHA loan limits are increasing in 2022. The new baseline limit – which applies to most single–family homes – will be $420,680. That's nearly a $65,000 increase over last year's FHA loan limit of $356,360. The Federal Housing Administration is raising its lending limits to keep pace with home price inflation.
As a general guideline, 43% is the highest DTI ratio a borrower can have and still get qualified for a mortgage. Ideally, lenders prefer a debt-to-income ratio lower than 36%, with no more than 28% of that debt going towards servicing a mortgage or rent payment.
Often, you will not have to pay PMI on Jumbo loans, as they usually require a higher down payment. PMI is designed for home buyers who make low down payments. However, since the down payment requirement will vary by lender, it is possible that your lender will require PMI in exchange for a lower down payment.
When it comes to appraisals, jumbo loans (for one-unit properties, generally loan amounts above $548,250, but could be higher in high-cost areas) sometimes require two appraisals. ... It's also less costly because you don't have to worry about paying for two appraisals, which will save you money on lending fees.
A 30-year fixed jumbo mortgage is a home loan that will be repaid over 30 years at a fixed interest rate. ... Most such jumbo mortgages also require 20 percent down payments and stronger income documentation.
In addition, Caliber requires a minimum credit score of at least 620 – even for FHA loans. Many lenders will start at 580 for those. So if your credit is on the low end, this might not be the ideal lender for you.