Typically, jumbo loan rates are higher than conventional loan rates. Since jumbo loans carry higher loan amounts and pose higher risks to lenders, they often come with higher interest rates. Additionally, jumbo loans may require larger down payments and stricter qualification criteria compared to conventional loans.
If you live in an area with a high cost of living, or you're in the market for an expensive home, you may need a jumbo loan to finance your purchase. Jumbo loans are mortgages with loan amounts that exceed local conforming loan limits.
Payment: Often, jumbo loans require at least 10-20% down. Stricter Debt-to-Income Ratios (DTI): Lenders look for a DTI of 43% or lower. Documentation: You'll need to provide more documentation, such as income verification and asset statements.
Securing a jumbo mortgage can offer potential tax benefits, such as deductions on mortgage interest and property taxes, which might reduce the cost of owning a high-value home. However, these benefits are subject to IRS regulations and eligibility criteria, and not all borrowers will qualify.
In general, a jumbo loan will have higher interest rate than a conventional loan. However, if you can prove that you are a high-income earner with definitive capability of paying back your loan, some lenders may deem you as lower risk and thus provide you with a comparable interest rate to a conventional loan.
In most cases, you can deduct all of your home mortgage interest. How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds.
About jumbo loans
A loan is considered jumbo if the amount of the mortgage exceeds loan-servicing limits set by Fannie Mae and Freddie Mac — currently $806,500 for a single-family home in all states (except Hawaii and Alaska and a few federally designated high-cost markets, where the limit is $1,209,750).
Most lenders require at least 10% of the home's value as a down payment on a jumbo loan, although some may ask for up to 30% to reduce their risk. If you put less than 20% down, you'll likely be required to have private mortgage insurance (PMI) until you have at least 20% equity in your house.
A “piggyback” second mortgage is a home equity loan or home equity line of credit (HELOC) that is made at the same time as your main mortgage. Its purpose is to allow borrowers with low down payment savings to borrow additional money in order to qualify for a main mortgage without paying for private mortgage insurance.
Borrowers typically seek jumbo loans to finance high-value homes for which more traditional mortgage options are limited.
Qualification Thresholds for Jumbo Loans
There usually is a hard credit score minimum of 700, and many lenders may even require as high as 720 or 740. Debt-to-income (DTI) ratio: The maximum DTI for a Jumbo loan is typically around 45%,though this can vary depending on the specific lender.
Although a 700 credit score will typically get you a jumbo loan approval, lenders often offer the best jumbo mortgage rates to borrowers with higher credit scores. Make a bigger down payment. Unlike conventional loans, you'll need at least a 10% to 20% down payment to qualify for a jumbo loan.
A jumbo loan is a great option for homebuyers searching for an expensive home or any home in a robust housing market. Currently, these loans may offer an advantage to buyers in high-cost real estate markets, though higher interest rates may offset some of the benefits.
Difficult process: Jumbo loans come with higher risks for the lender which makes the refinancing process time-consuming. This also means the requirements can be stricter than conforming mortgages. Lenders usually look for high credit scores, low DTI ratios and good cash reserves.
Most mortgages, including conventional conforming loans and jumbo loans, aren't assumable. Some conventional loans have assumption clauses for exceptional circumstances, such as the death of a spouse – but that doesn't apply to homebuyers who are seeking an assumable mortgage.
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.
While PMI is an initial added cost, it enables you to buy now and begin building equity versus waiting five to 10 years to build enough savings for a 20% down payment. While the amount you pay for PMI can vary, you can expect to pay approximately between $30 and $70 per month for every $100,000 borrowed.
You can potentially avoid a jumbo loan by saving for a larger down payment. By saving more, you reduce the amount you need to borrow. You can also avoid applying for a jumbo loan by looking at less expensive properties you can finance with a conforming loan.
A jumbo loan is a non-conforming loan for loan amounts greater than $806,500 for a single-family home. In certain high cost areas, including Alaska and Hawaii, the conforming limit is up to $1,209,750.
Today's national jumbo mortgage interest rate trends
For today, Sunday, January 12, 2025, the national average 30-year fixed jumbo mortgage interest rate is 7.10%, up compared to last week's of 7.03%. The national average 30-year fixed jumbo refinance interest rate is 7.09%, up compared to last week's of 7.07%.
Generally, deductible closing costs are those for interest, certain mortgage points and deductible real estate taxes. Many other settlement fees and closing costs for buying the property become additions to your basis in the property and part of your depreciation deduction, including: Abstract fees.
Yes, you can offset 100% of your mortgage. This means that if your offset account balance matches your loan balance, you effectively pay no interest. However, your regular loan repayments will continue and go entirely towards paying down the loan's principal.
As a homeowner, you'll face property taxes at a state and local level. You can deduct up to $10,000 of property taxes as a married couple filing jointly – or $5,000 if you are single or married filing separately. Depending on your location, the property tax deduction can be very valuable.