If you’re in the market for a large loan, you may have come across the term “jumbo loan.” But what is a jumbo loan, exactly? And what are the requirements to qualify for one? In this blog post, we will answer all of your questions about jumbo loans and provide a comprehensive guide to qualifying for one. Keep reading to learn more!
What is a Jumbo Loan Table of Contents
What is a Jumbo Loan?
A jumbo loan, also known as a non-conforming loan, is a mortgage loan that doesn’t conform to guidelines set by the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC). Jumbo loans are usually for higher-priced homes and come with stricter underwriting guidelines than other types of loans.
What Are the Requirements to Qualify for a Jumbo Loan?
There are a few key requirements you’ll need to meet in order to qualify for a jumbo loan. First, you’ll need a strong credit score. Generally, you’ll need a credit score of 700 or higher to qualify for a jumbo loan. Additionally, you’ll need to have a low debt-to-income ratio and a strong history of financial stability.
If you’re self-employed, you’ll also need to provide additional documentation to prove your income. This may include tax returns, bank statements, and other financial documents.
What Are the Benefits of a Jumbo Loan?
There are several benefits that come along with taking out a jumbo loan. First, you’ll have access to more money. If you’re looking to purchase a high-priced home, a jumbo loan will give you the funds you need to do so. Additionally, jumbo loans often come with lower interest rates than other types of loans. This can save you money in the long run and make your monthly payments more manageable.
What is The Difference Between a Jumbo Loan and a Traditional Mortgage?
The biggest difference between a jumbo loan and a traditional mortgage is the amount of money you can borrow. A jumbo loan is a non-conforming loan because it exceeds the county’s general or high-cost area loan limits. This means that jumbo loans are available in higher loan amounts than traditional mortgages. Jumbo loans are also known as non-conforming loans because they don’t conform to Fannie Mae and Freddie Mac guidelines. The main guideline for these government-sponsored enterprises (GSEs) is that the maximum loan amount cannot exceed $484,350 in most counties across the U.S. Anything above this limit is considered a jumbo loan and has different guidelines than a traditional mortgage.
While you can get a jumbo loan for more money than you could with a traditional mortgage, they typically come with higher interest rates and stricter underwriting guidelines. This is because jumbo loans are considered riskier for lenders. They’re also harder to sell on the secondary market, so lenders are less likely to offer them. If you’re thinking of getting a jumbo loan, make sure you understand the risks and benefits before you apply.
What is The Jumbo Loan Limit?
The jumbo loan limit is the maximum amount that you can borrow with a jumbo loan. This limit varies by county and is generally higher in counties with high home prices. In 2020, the conforming loan limit for most counties across the U.S. is $510,400. Anything above this limit is considered a jumbo loan. Here are a few examples of 2020 jumbo loan limits:
- Los Angeles County, CA: $765,600
- Marin County, CA: $765,600
- Orange County, CA: $765,600
- San Francisco County, CA: $765,600
- Santa Clara County, CA: $765,600
As you can see from the examples above, the jumbo loan limit is higher in counties where home prices are high. This is because lenders consider jumbo loans to be riskier than traditional mortgages. If you’re thinking of getting a jumbo loan, make sure you understand the risks and benefits before you apply.
How Much Does a Jumbo Loan Cost?
Jumbo loans typically come with higher interest rates than traditional mortgages. This is because they’re considered riskier for lenders. Jumbo loans are also harder to sell on the secondary market, so lenders are less likely to offer them. As a result, you may have to pay a higher interest rate if you get a jumbo loan. You may also have to pay private mortgage insurance (PMI) if your down payment is less than 20%.
If you’re thinking of getting a jumbo loan, make sure you understand the risks and benefits before you apply. Jumbo loans can help you buy a more expensive home, but they come with higher interest rates and stricter underwriting guidelines. Make sure you compare offers from multiple lenders to get the best deal.
What Other Fees Come With Jumbo Loans
Besides the higher interest rates that come with a jumbo loan, there are also other fees to keep in mind. These can include an origination fee, which is a charge by the lender for processing the loan, as well as appraisal and title fees. You may also be required to purchase private mortgage insurance (PMI) if you’re putting down less than 20 percent for your down payment. All of these additional costs can add up, so make sure to factor them into your budget before you commit to a jumbo loan.
Can I Get a Jumbo Loan With Bad Credit?
It’s possible to get a jumbo loan with bad credit, but it’s not easy. You’ll likely have to pay a higher interest rate and put down a larger down payment than you would with good credit. You may also be required to get a co-signer on the loan if your credit is particularly bad. If you’re looking for a jumbo loan and have bad credit, talk to a few different lenders to see what your options are.
What Are Some Alternatives to Jumbo Loans?
If you’re not able to qualify for a traditional jumbo loan, there are some alternatives that you can consider. One option is to get what’s called a non-conforming loan. These types of loans typically have higher interest rates and stricter eligibility requirements than traditional loans, but they can still be a good option if you don’t qualify for a jumbo loan.
Another alternative is what’s known as a portfolio loan. Portfolio loans are offered by private lenders and they usually have more flexible terms and conditions than traditional loans. However, they typically require a larger down payment than traditional loans.
What’s The Difference Between a Conventional Loan and a Jumbo Loan?
The main difference between a conventional loan and a jumbo loan is the size of the loan. Jumbo loans are typically larger than conventional loans, though the exact amount varies by lender. In most cases, you’ll need a down payment of at least 20% to get a jumbo loan. You may also be required to get private mortgage insurance (PMI) if your down payment is less than 20%. Because they are seen to be riskier for lenders, jumbo loans have higher interest rates than traditional mortgages.
What is The Jumbo Loan Down Payment?
The jumbo loan down payment is the amount of money you’ll need to put down on your home when you get a jumbo loan. In most cases, you’ll need a down payment of at least 20% to get a jumbo loan. You may also be required to get private mortgage insurance (PMI) if your down payment is less than 20%.