What is a Jumbo Loan?
A jumbo loan is quite obviously, a big loan. Technically it is a larger dollar amount than a “conforming” loan and there are special guidelines that accompany these large loans. Some borrowers think that just because they are borrowing a large sum of money they should expect much higher interest rates, but that is not necessarily the case. Jumbo loan borrowers are usually people with high incomes, good credit, and usually are paid on-time and according to the terms of the loan agreement. Lenders compete for these loans, and a borrower should expect to have someone direct them to the best deal. You can check the conforming loan limits for your county on the Federal Housing Finance Agency’s website .
Jumbo loans are normally secured by a high-value piece of property and so the loan processing and approval process will probably include a very thorough appraisal and careful underwriting by the lender. But jumbo loans are quite common and they are available in a variety of re-payment terms.
Jumbo Loan Requirements
The loan requirements for a jumbo loan will vary from one lender to another.
- Credit Score – Many jumbo lenders do not have a minimum credit score requirement if the LTV is low (below 70% in most cases). To be eligible for a higher LTV (meaning you can place a smaller down payment), expect to need a FICO score of at least 600.
- Appraisal – In some cases, two appraisals may be required by the lender in order to verify the value of the home.
- Down Payment – The amount of a down payment you will need to place will depend largely on what your credit score is. If you have a credit score about 680, you should be able to qualify for a down payment of only 10%. The lower your credit score is, the larger the down payment required will be.
- Income Requirements – You will need to document your income with either 2 years of tax returns, or 12-24 months worth of bank statements (if you qualify for a bank statement loan).
- DTI Ratio – The max DTI allowed by most jumbo mortgage lenders is 45%. However, it is very common to see exceptions made if you have plenty of cash reserves / assets.
- Assets / Cash Reserves – You will have an easier time getting approved if you have at least 12 months of cash reserves to cover your mortgage payment.
The above requirements are some of the standard loan requirements that you will likely need to satisfy when applying for a jumbo loan. You should expect to receive some unique loan conditions from any jumbo mortgage lender that you apply with.
Jumbo Loan Mortgage Lenders
Below are some of the top jumbo mortgage lenders of 2018:
1 – US Bank
3 – Bank of America
5 – Quicken Loans
6 – Sprout Mortgage
7 – BMO Harris Bank
10 – Prime Lending
The above lenders are a few of the top choices for jumbo loans. If you would like some assistance determining which jumbo mortgage lender may offer you the best mortgage for your jumbo loan, we can help match you with a lender (depending on your location and particular needs).
Jumbo Construction Loan
If you would like to finance the construction of your dream home, we work with lenders offering jumbo construction loans. There are two different types of financing options for jumbo construction loans:
- Construction-to-Permanent Loans – This option combines construction financing and mortgage financing into one loan. You will initially receive the necessary funds for the construction of your new home. Once you move in, the lender will includes the entire loan balance into one mortgage.
- Stand Alone Construction – With this option, you will have two separate mortgages. The first will be to finance the construction of your new home. Then, when the construction is complete, you will need to receive a new mortgage loan, which will pay off the construction debt.
Frequently Asked Questions
Are the interest rates higher on jumbo loans?
The interest rates on jumbo loans are typically higher than on conventional loans, as there is a greater risk for lenders.
Do jumbo loans require PMI (private mortgage insurance)?
Jumbo loans generally do not require mortgage insurance, as these loans usually have a maximum LTV of 80%, or 90% LTV programs that do not require mortgage insurance.
Can you refinance a jumbo loan?
Yes, there are options to refinance an existing jumbo loan. The loan requirements are much the same as the requirements for a purchase. We work with jumbo mortgage lenders offering refinance programs for jumbo loans.
Are super jumbo loans available for much larger loan amounts?
Yes, we work with super jumbo mortgage lenders. This includes options with several lenders that offer loans all the way up to $5,000,000. However, we have a lender that has financed a luxury home in the amount of $20,000,000, so there isn’t necessarily an upper loan size limit.
Can you use a non-occupying co-borrower to income qualify?
Yes, some of the lender that we work with allow one to income qualify using the income of a non-occuping co-borrower.
Are jumbo loans available for first time home buyers?
Yes, a first time home buyer may be able to qualify for a jumbo loan. There are not any restrictions in place preventing a first time home buyer from obtaining jumbo financing if they meet the loan requirements.
Are jumbo loans available for foreign nationals and ITIN borrowers?
Yes, both jumbo loans and super jumbo loans are available for foreign nationals and ITIN borrowers.
Can you finance a luxury condo or co-op with a jumbo loan?
Yes, jumbo loans are available for co-ops are luxury condos.
What types of properties can you finance with a jumbo loan?
Jumbo loans are available for 1-4 unit properties (single family residences, duplexes, triplexes, and fourplexes), as well as condominiums and co-ops.