The Jumbo Loan

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Mitch Castellani

NMLS: 460168

What is a Jumbo Loan?

A jumbo loan is a type of mortgage that is used to finance homes that are too expensive for a traditional conventional loan. Homes that exceed the local conforming limit, which in most cases is $647,200, require a jumbo loan. Also known as non-conforming conventional mortgages, these loans are riskier than traditional mortgage loan types because these loans cannot be guaranteed by Fannie Mae or Freddie Mac. This means that the lender is not protected from losses if a borrower defaults on their loan. Jumbo loans are normally available with either a fixed-rate or adjustable-rate mortgage with a higher interest rate than the typical loan.

Difference Between Jumbo and Conforming Loans

The main difference between a jumbo loan and a conforming loan is the size of the loan. Jumbo loans also require a larger down payment than most other loan types. Higher interest rates and higher closing fees are also typical with a jumbo loan compared to a conforming loan.

Before you decide to apply for a jumbo loan, it is important to know if you are financially stable enough to afford this type of loan and the home itself. You should always borrow money with care and fully understand the numbers and money involved before making a decision.

Qualifying for a Jumbo Loan

  • Credit Score

    Lenders may require your FICO score to be higher than 700 to qualify for a jumbo loan.

  • Income Requirements

    Lenders will review your debt-to-income ratio to ensure you do not become overwhelmed with your new home payment. Most lenders cap debt-to-income ratio at 43% but will consider your cash reserves into their decision.

  • Cash Reserves

    You are more likely to be approved for a jumbo loan if you have a large amount of cash in the bank. Some lenders may require you to show that you have enough money saved to cover one year of mortgage payments.

  • Documentation

    To prove that you are financially stable, you will need to provide ample amounts of documentation including full tax returns, W-2s, 1099s, bank statements, and information on any investment accounts.

  • Appraisals

    Some lenders may require more than one home appraisal for the home you are looking to purchase.

The AnnieMac Promise

Here at AnnieMac Home Mortgage, we take the time to walk you through the mortgage process and ensure that you are financially ready for a mortgage commitment. If a jumbo loan is needed and is something you can afford, we will be there for you every step of the way.