Jumbo mortgage: Your loan could be known as a jumbo mortgage when you apply for a mortgage on a very costly piece of real estate.
When you borrow more money than the local cap on a joint loan, you will need a jumbo mortgage. Across various parts of the United States, the precise dollar amount that determines whether a loan is a jumbo loan varies.
What is a Jumbo Fixed Rate Mortgage?
Jumbo mortgages are home loans also known as jumbo mortgages, which exceed the Federal Housing Finance Agency’s mortgage-conforming limits.
Like traditional loans, Fannie Mae or Freddie Mac can not buy, guarantee, or securitize a jumbo loan. Jumbo mortgages are designed to finance luxury properties and homes in highly competitive local real estate markets with unique requirements for underwriting and tax implications.
This limit is $484,350 across most of the country, but in some high-cost areas, such as Hawaii, the limit is $726,525 (this higher limit also applies to non-continental loans).
- A jumbo loan is a type of financing that exceeds the limits which is set by the Federal Housing Finance Agency and cannot be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac.
- Homeowners must undergo more rigorous credit requirements than those who are applying for a conventional loan.
- Approval requires a stellar credit score and a really low debt-to-income ratio.
- The average APR for a jumbo mortgage is usually par with conventional mortgages, while down payments are roughly 10% to 15% of the total purchase price.
Jumbo Mortgages vs. Regular Mortgages
The biggest difference is the house price between a standard mortgage and a jumbo loan. Since they offer better interest rates and lower minimum down payment, jumbo mortgages are more difficult to qualify for, and you will have fewer options for borrowing.
It is more common and easier to obtain daily mortgages. For a traditional loan, a higher down payment is usually required, compared with as little as 3% for a jumbo loan.
The government also funds conservative loans and is more generous than jumbo loans. Your credit score does not have to be as high as it is to qualify for a traditional mortgage, so your debt-to-income ratio may be higher, which is good news if you still pay student loans or have other kinds of debt.
How to shop for jumbo mortgage rates
NerdWallet’s mortgage rate tool can help you with finding competitive jumbo loan rates. In the “Refine results” section, put in a few details about the loan you are looking for, and you will get a personalized rate quote in minutes, without providing any personal information.
From there, you can start the process to get preapproved for your home loan and it is as easy as that.
. Where Can I Find the Best Jumbo Mortgage Rates?
When you are buying an expensive home, it is really important to shop around for an affordable loan. That is because the more you borrow, the more your loan will cost you over time.
You should get pre-qualified quotes from several of the best mortgage lenders, so you will be able to compare quotes and find the lender that gives the best rates for your situation.
Jumbo loan or not, your own mortgage rates will also be affected by:
- Your credit history and FICO credit score
- Your income
- The down payment amount
- The loan term
- The location you’re buying in
- Whether the home will be your primary residence
- Your loan type (adjustable-rate or fixed-rate)
- Other financial factors
So keep these things in mind.
. What loan amount qualifies as a jumbo mortgage?
A jumbo mortgage is any loan amount which is above the national conforming loan limit, which is updated yearly and varies based on one’s location.
. When should you consider a jumbo mortgage?
You should consider getting a jumbo mortgage if you are buying a high-priced home and if you are in a position to qualify for the more stringent requirements they carry, including a high credit score, strong credit history and also a 20% down payment.
Should I Consider a Jumbo Mortgage?
If you decide to buy a new home and to borrow above your local conforming loan limit, then Jumbo mortgage is your choice. Your mortgage will be grouped as a jumbo loan because of the amount you are borrowing.
But before you buy a house that is this expensive, you need to make sure you can afford the debt payments you are taking on. Buying a home that is not affordable could put you at risk of foreclosure or make it difficult to do other important things with your money.
Gladly, to protect both borrowers and themselves, most lenders will not let this to happen. Mortgage lenders typically need you to have a debt-to-income ratio no higher than 43% in order to take out a mortgage loan.
So if your monthly payments on all outstanding debts—including that of your mortgage—exceed 43% of your monthly income, you will have difficulties getting approved for a mortgage loan.