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Jumbo Loan

What is a jumbo loan?

A jumbo loan is also known as “non-conforming” loan, meaning it does not conform to the established guidelines set by Fannie Mae and Freddie Mac, both U.S. government backed agencies. Because jumbo loans cannot be funded by these two agencies, they are considered riskier for lenders and therefore usually carry higher interest rates.

Jumbo loans are loans where the borrowed mortgage amount is larger than the conforming loan limit set by the Federal Housing Finance Agency. In 2019, the conforming loan limit* increased to $484,350, except in high cost living locations such as Hawaii and Alaska, where it is $726,525 or higher.

A loan is considered jumbo if the borrowed amount is more than the conforming loan limit even by a few cents.

Because jumbo loans are considered riskier, they adhere to a different set of guidelines, and it is important to know and understand the basics if your mortgage banker informs you that you’ll need a jumbo loan.

Due to the guidelines, we strongly encourage you to work with an experienced mortgage banker to fully understand your options if considering a jumbo loan.

Key Things to Remember

  • Jumbo loans are often used for large, single-family homes.
  • Jumbo loans require a minimum down payment of 20% or more.
  • Jumbo loans can be fixed-rate or adjustable-rate.
  • Private mortgage insurance (PMI) is not available with a jumbo mortgage.
  • Borrower’s credit score must be at least 700.
  • The maximum debt-to-income ratio for jumbo loan borrowers is up to 45 percent in some cases.
  • Jumbo loan borrowers must have at least six months of reserves in their bank accounts after closing.
  • Jumbo loans carry higher interest rates, and often have more stringent underwriting and larger down payment requirements.
  • Given the size of a jumbo loan, it may be more expensive to refinance, primarily because of higher closing costs.

To learn more about qualifying for a jumbo loan, call to speak with one of our expert mortgage bankers or if you're ready, get started today.

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The above information is for educational purposes only. *Conforming loan limits are based on the county and state where the home is located. It is important that you work with a trusted and experienced mortgage professional to know what exactly the conforming loan limit is where you are looking to purchase a home.