A “jumbo loan” refers to loans that exceed conforming loan limits from Fannie Mae and Freddie Mac – which may be required if you live in an area with high housing prices.
Looking for more details? Residential Home Mortgage Corporation is here to help and we’ll guide you through the basics of jumbo loans, and what a jumbo loan may mean for your home purchase.
What Is A Jumbo Loan?
Jumbo loans are home loans that exceed the amount allowed for the “conforming loan limit” from Fannie Mae and Freddie Mac. These are the government-sponsored enterprises that buy and regulate most mortgages for single-family homes in the US.
The 2022 limit for most of the US is $726,200 – however, some areas like Alaska, Hawaii, and select counties in the US have higher limits of up to $1,089,300. The areas with higher loan limits are known as high-cost areas. Your loan specialist can help you figure out the conforming loan limit for your area on a county-by-county basis.
Basically, if your loan amount exceeds this limit, it’s a jumbo loan. This means it can’t be purchased by Fannie Mae and Freddie Mac.
Compared to a standard mortgage, a jumbo loan is viewed as a higher-risk loan, so it’s subject to more strict qualifying criteria – and higher interest rates, in most cases.
Why Would I Need A Jumbo Loan?
A jumbo loan is only required if your requested loan amount is above the conforming loan limits.
You can avoid a jumbo loan by either putting more money down or looking for a home that has a lower purchase price. But if you are committed to purchasing a home that results in a jumbo mortgage a loan specialist is here to assist you.
What Do I Need to Qualify for A Jumbo Loan?
Because jumbo loans are viewed as riskier than loans that can be regulated by Fannie Mae & Freddie Mac, you’ll need to meet the following requirements:
A high credit score – Normal jumbo loan programs have minimum credit score requirements that are above Fannie Mae and Freddie Mac guidelines (think 680+).
A large down payment – Normal jumbo loan programs have minimum down payment requirements that are much larger than conforming loan programs.
A lower DTI (debt-to-income ratio) – Normal jumbo loan programs have DTI guidelines that are lower than conventional mortgages (think 36% DTI).
More Verified Asset Reserves – Normal jumbo guidelines require greater asset reserves than conforming loan programs (think 12-24 month reserves).
Ready to Mortgage Smartly™?
We’re dedicated to helping our customers with their mortgage needs. If a jumbo loan is what you need to complete your home buying experience, let our team guide you through the process. We’re here to provide you with the best rates and overall great service.
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