Jumbo Loans

Jumbo loans are a type of home loan or mortgage that exceeds the limitations listed by the Federal Housing Finance Agency. As of 2022 the limit for a conventional home loan is listed as $647,200 for most of the country. However, this may vary slightly depending on the state and county in which the property is based.

Unlike conventional loans, jumbo loans cannot be purchased, securitized, or guaranteed by Freddie Mac or Frannie Mae. Jumbo loans also tend to have stricter requirements for approval due to the higher risks involved for the lender. To get approved, the borrower needs to have a low debt-to-income (DTI) ratio. Depending on the lender a DTI below 43% should be approved although an even lower DTI could improve chances of approval.

While in the past, Jumbo loans were known to have higher interest rates than a conventional loan, today it is not the case. In recent years the annual percentage rate or APR tends to be similar to a standard mortgage. Down payments on jumbo loans are somewhat similar to the APR. In the past, a higher down payment was required, but now some lenders offer jumbo loans at rates as low as 20% of the property’s appraisal.

As with most standard mortgages, the borrower will need to provide proof of income, usually in the form of payslips. A high credit score and documentation of other assets, such as other properties owned is also required.

Jumbo loans are great for investors that are looking to purchase a luxury property or a property in high-end neighborhoods.

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