Jumbo Loans

What is a Jumbo Loan?

If you’re looking to purchase an investment property or mansion but need more money than a conventional loan can provide, then the jumbo loan is an option for you. These loans are used when the amount of money needed is greater than that supplied with a typical conforming loan. 


The Federal Housing Finance Agency sets limits on conforming loans around the country. These maximums are usually somewhere between $500,000 and $800,000, depending on the area. Any loan greater than the limit in that area is considered to be a jumbo loan. These mortgage loans are available at a fixed or adjustable rate and for up to 30 years, depending on the lender. Jumbo loans can be a good option for those who want to purchase an expensive home but don't have the cash on hand to do so within conventional loan limits.

Jumbo Loan Requirements: Who Qualifies?

Jumbo loan lenders will require a higher down payment for a jumbo loan than they would for a conforming loan because the risk factor is greater for banks. The loans are not government-backed, and because of the amount of money that is being lent, banks have to be careful about who receives a jumbo loan.


Banks will be interested in your financial history and previous employment history, as well as any asset statements like a sizable cash reserve. Some lenders even demand that you set aside enough money for a whole year's worth of mortgage payments or a larger down payment.  You'll also need to have a good credit score, and there are more stringent debt-to-income limitations. The requirements are generally more strict than those for a conforming loan.

Conventional Loans

Benefits of Jumbo Mortgage Loans

Jumbo loans give you a lot of options. One advantage that a non-government-backed loan offers is the ability to buy a property other than your primary residence. It might be your home, a vacation house, or even an investment property. Rates on jumbo loans are often not prohibitive. It all depends on whether or not you can get a decent loan and with which bank. Most importantly, Jumbo loans are the only loan that may possibly provide you with enough money to cover a larger-than-conforming purchase.


Disadvantages of Jumbo Mortgage Loans

Higher Interest Rates

The obvious drawback is that the interest rates are generally higher than for a conforming loan. But, if you can get a decent rate, this may not be a problem. Additionally, you'll need to have excellent credit and prove that you're a low-risk investment. Because of the big loans' size, banks frequently demand a minimum down payment of 20%. After all, the banks are risking their money, and they want to ensure that you have enough expertise with your finances to be able to save up such a huge sum and will not easily allow the loan to default.


Stricter Requirements

Since the risk is higher for the lender, the loan criteria is more stringent. You'll need a high enough salary to cover the large monthly payment comfortably, as well as a substantial sum of money set aside for reserves. Furthermore, jumbo loans have higher interest rates than conforming loans. Jumbo loans will come with extra closing fees and costs than a regular conforming loan, as well.  If you're looking for a jumbo loan, you'll need to be prepared to jump through a few more hoops than usual, as the process is generally more difficult than it is for a conforming loan, but with the right loan officer, you can get the help you need to finance your new home.

Applying for a Jumbo Mortgage Loan

If you want a jumbo loan, the first step is to locate the right lender. Take the time to gather all of your documents and ask your lender what documentation you'll need in order to obtain a preapproval letter. Once you've been pre-approved, it's time to find a property within your budget and make an offer. The lender will submit your application to be underwritten after your offer is accepted, and you'll be ready to close the loan once it is. 


If you’re in need of a jumbo loan, then Reliable Mortgage may be able to help. To discuss your options or get started, give us a call today and our experts will take care of you.


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