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Jumbo Mortgage Details

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What is a Jumbo Mortgage?

A jumbo mortgage is a home loan for an amount that exceeds conforming loan limits established by US regulation. The jumbo loan limit is $417,000 in most of the United States.  Jumbo mortgages are often securitized by institutions other than Fannie Mae or Freddie Mac. These securities carry a higher credit risk than those issued by Fannie Mae or Freddie Mac, which is reflected in a slightly higher interest rates.  Jumbo mortgages are available for primary residences, second or vacation homes and investment properties, and are also available in a variety of terms.  Jumbo mortgages are available in a variety of fixed-rate or adjustable-rate loan options.

Conforming Jumbo Loans

New legislation has also brought about so-called “conforming-jumbo loans” or “high balance mortgages” which are neither jumbo loans nor conforming loans, and range between $417,001 and $625,500 for conventional loans, and $417,001 to $729,750 for FHA loans.  Basically a loan amount in this range will carry higher financing costs than a conforming loan, but may be cheaper than a true jumbo loan. The limit on jumbo loans is $625,500 in the highest-cost areas.  There are 3,143 counties in the United States (if you count Alaska’s boroughs, Louisiana’s parishes and the District of Columbia as counties, and exclude Guam, the Virgin Islands and Puerto Rico). Here’s the loan-limit breakdown for 2016:

  1. 2,916 counties have a limit of $417,000.

  2. 108 counties have a loan limit of $625,500. These are the highest-cost housing markets, such as Los Angeles, New York City and San Francisco.

  3. 115 counties have loan limits higher than $417,000 and lower than $625,500. These housing markets have higher-than-normal prices but not as high as, say, Los Angeles.

  4. 4 of Hawaii’s 5 counties have limits between $657,800 and $721,050. (Limits are allowed to be higher in Alaska, Guam, Hawaii and the Virgin Islands under a long-standing regulation.)

Super Jumbo Mortgage

A Super Jumbo Mortgage is classified as a residential mortgage greater than $650,000, although lenders differ on just what constitutes a super jumbo mortgage subject to their criteria.

Jumbo Mortgage Requirements

Qualifying for a jumbo mortgage is not unlike qualifying for a non-jumbo mortgage. You will need to meet credit, income and asset requirements and submit appropriate documentation to back up the information on your mortgage loan application.  Below are a few guidelines to consider when applying for a jumbo loan:

  • Credit history – An average credit score of 680 is typically needed to qualify for a jumbo mortgage. However, lenders set their own credit score requirements, and some may require higher credit scores for approval.

  • Financial strength/Documentation – When applying for a jumbo mortgage, the maximum debt-to-income ratio for jumbo for loans is 45 percent. A previous bankruptcy requires that you have at least four years from a chapter 13 and six years from a chapter 7 with a good credit record without issues in that past period leading up to your loan application. At least two years of employment with the same employer is also required with consistent income or upward trending income.

  • Down payment – There are options for jumbo loans with private mortgage insurance option with as little as 5% down payment. However, a credit score above 700 is required for private mortgage insurance. Keep in mind a smaller down payment affects interest rates and the amount of the monthly mortgage payment.

  • Property appraisal – The property appraisal must support the purchase price for the home and the mortgage the borrower wants. The lender may require 2 appraisals depending on the property type and loan amount.