If you don't work in finance, it's easy to forget that there are a wide variety of mortgage loan types. Just as no two borrowers are exactly alike, no two loan programs are set up precisely the same way.
If a loan amount is greater than the standards set by Fannie Mae, the loan is a jumbo loan. If a loan is within those limits, on the other hand, it is known as a conforming loan.
What is a jumbo loan?
While it varies by the market area and changes each year, loan amounts above about $548,250 are typically treated as jumbo loans. Lenders consider these loans risky regardless of your creditworthiness. For the most up-to-date information on these limits, visit the Federal Housing Finance Agency loan limits page.
This risk is generally balanced by a higher interest rate and a larger down payment than what's required for conforming loans. While these types of loans may cost borrowers a bit more, their availability expands credit opportunities for high-priced properties.
Jumbo loan guidelines and requirements
All home loans come with specific requirements, and jumbo loans are no different. Standards vary by lenders, but here are the basics:
- Down payment requirements for jumbo loans vary, but typically 15-30% is required as a down payment for primary residences.
- Loan amounts that are considered Jumbo differ by area. If you are thinking of borrowing more than $548,250, talk to your loan officer to find out if you need a jumbo loan.
- Jumbo loans are available for primary residences, second homes, and investment properties.
- The maximum loan amount varies based on the size of the down payment and the credit history of the borrower, among other factors.
- In almost all cases, your income must be fully documented, and debt-to-income ratios will be based upon the type of transaction—purchase, refinance, or cash out refinance.
Is a jumbo loan right for you?
If you're considering a mortgage for a property outside conforming limits, your loan officer can help. Get in touch today!