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.
The main advantage of a jumbo loan is that it allows the borrower to buy a property that they would not be able to if they limited themselves to conforming loans. This can allow people to buy larger homes than they otherwise would or to buy in a highly competitive market.
A jumbo loan is not a bad idea if you can comfortably afford the monthly mortgage payments. As with any home loan, that depends on your income and your current debt load. You can use a mortgage calculator to estimate your future monthly payment and find to whether a jumbo loan might make sense for you.
Also called non-conforming conventional mortgages, jumbo loans are considered riskier for lenders because these loans can't be guaranteed by Fannie Mae and Freddie Mac, meaning the lender is not protected from losses if a borrower defaults.
Jumbo loans typically have much higher down payment requirements compared to conforming loans. It's common to see lenders require 20% down on jumbo loans for single-family units. You may also need a higher down payment for second homes and multifamily units.
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.
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 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.
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.
In most of the U.S., the 2020 maximum conforming loan limit for one-unit properties will be $510,400, an increase from $484,350 in 2019.
Jumbo Loan Benefits:
30-year fix rate, 15 year or common adjustable-rate (ARM) options. No early payoff penalty.
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 Tend to Be More Expensive
Currently, the spread between conforming and jumbo loans is less than half a percentage point. But it's not just higher mortgage rates you have to worry about with a jumbo loan.
Heftier reserves – The down payment on a jumbo loan is typically 10 percent to 20 percent (and sometimes more). “Anything lower than a 10 percent down payment and you're probably going to pay for it in higher rates,” Cohan says.
A jumbo loan, also known as a jumbo mortgage, is a type of financing that exceeds the limits set by the Federal Housing Finance Agency (FHFA). Unlike conventional mortgages, a jumbo loan is not eligible to be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac.
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.
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. In certain high-cost areas, the ceiling for conforming mortgage limits is 150% of that limit, or $970,800 for 2022.
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.
Down payment requirements for your primary residence, or main home, can vary. Conventional Loan: Conventional loan requirements for primary residences are totally up to the individual lender. Some lenders might require you to have 5% down, while other lenders may only require 3%.
Borrowers with lower credit scores might be required to make a down payment of 5% or more to get a conventional loan, meaning they'd need to finance 95% of the home's value. This is sometimes referred to as a “5 down conventional loan” or a “conventional 95 mortgage.”
A loan is considered jumbo if the amount of the mortgage exceeds loan-servicing limits set by Fannie Mae and Freddie Mac — currently $647,200 for a single-family home in all states (except Hawaii and Alaska and a few federally designated high-cost markets, where the limit is $970,800).
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 2022, you can borrow up to $647,200 with a conforming loan in most parts of the US. In areas with a higher cost of living, you may be able to borrow up to $970,800. To borrow more than the FHFA allows for conforming loans in 2022, consider applying for a jumbo loan.
Any loan that exceeds $970,800 is considered a jumbo loan.