Jumbo Loans

A jumbo loan is a type of mortgage in which the loan amount exceeds the limit set by the Federal Housing Finance Agency, or FHFA. A jumbo home loan is a loan designed for homeowners who need a larger loan than what a traditional loan program offers.

The major difference between jumbo loans and conventional home loans is their size. Due to their larger size, jumbo loans are ineligible for Fannie Mae or Freddie Mac to purchase or guarantee, making them slightly riskier than conventional mortgages. As a result, eligibility requirements are usually stricter for jumbo loans.

To qualify for a jumbo loan, it helps to have excellent credit with a score above 680, as well as a low debt-to-income ratio, or DTI. Some lenders may ask for documentation showing you have enough cash on hand to cover the first 6 months or 1 year of mortgage payments. Consult a mortgage banker for details.

Each year, the Federal Housing Finance Agency, or FHFA, determines the maximum loan limit for conventional mortgages in the US. In certain places, including higher cost-of-living areas, the limit is higher. You can visit Fannie Mae to see this year's loan limits. To purchase a single-family home above the limit in your area, you'll need a jumbo loan. Jumbo loan limits for this program are above the conforming limits for your area and less than $3,000,000.

Higher mortgage limits mean the risk is greater for these types of loans, so you'll need to have a good credit score. The higher your credit score, the greater your chances of being approved for a jumbo mortgage. A better credit rating also means you have a better chance of being approved at a lower interest rate.

Jumbo loans work similar to conventional mortgage loans with a few differences. They can't be guaranteed by Fannie Mae or Freddie Mac because they exceed conforming loan limits. Because jumbo loans allow you to borrow more money to purchase a more expensive home, the requirements and approval process are stricter than the traditional mortgage loan process.

Jumbo loans offer several benefits to homebuyers.

• Borrow more money: Higher loan limits mean you can borrow more money to purchase a more expensive home:
• Manage one loan: No more loan juggling. You can purchase your home with one loan instead of piecing together multiple loans from multiple vendors:
• Lower interest rates (possibly). Depending on factors such as creditworthiness, income, homebuyer program and lender, you may qualify for a lower interest rate.

Yes. You should get a home appraisal any time you're purchasing a new home. This is especially important when applying for mortgage loans to purchase more expensive homes. An appraisal helps you negotiate better prices, ensures a fair and transparent homebuying process by providing a detailed view of the home and structure, and helps you close on your home faster and with fewer issues.

Loans with an origination balance above a specific amount, or conforming loan limit, are qualified as jumbo loans. What qualifies as a jumbo loan varies from state to state. Qualifications can change from year to year. Visit the Federal Housing Finance Agency to see conforming loan limits for your state.