Jumbo Mortgage Address Scoop
Feb 10, 2022By Joe A.

In some cases, a mortgage loan may be higher than a conforming loan limit. 

For these situations, a jumbo loan or jumbo mortgage is an option. In most areas, a mortgage amount that is higher than $548,250 surpasses the conforming loan limit. 

Article Sections: 

What Is A Jumbo Loan/Jumbo Mortgage?Other Jumbo Loan Costs To Consider 
The Requirements Of A Jumbo LoanQuestions To Ask When Considering A Jumbo Mortgage
Interest Rates For Jumbo LoansFinal Thoughts 

What Is A Jumbo Loan/ Jumbo Mortgage?

Jumbo Loan Definition- A jumbo loan is a type of loan that a buyer uses to mortgage their home. This specific type of loan can be used when the loan amount required exceeds the loan limit put in place for the area of the house they are planning to purchase. This limit varies, although the magic number typically is $548,250 (this limit varies year to year). Some housing areas have a higher limit for conventional or conforming loans if they are in a high-cost area where housing is typically more expensive than other areas. 

Bonus Tip: To look up valuable and detailed property information, a top suggested method is using a property search website

Jumbo Loan Requirements 

Jumbo Loan Requirements Address Scoop

The requirement for a jumbo loan is greater than the ones that are under the conforming loan limit. They typically require a more significant down payment, a great credit score ( typically, the credit score needs to be at or above 700), a more substantial down payment, and more in cash reserves. 

To receive a jumbo loan, the buyer might have to provide documentation to prove that they have the finances to pay for such a large monthly mortgage. This documentation can include anything from pay stubs to bank statements. 

My Thoughts: It is riskier for a lender to provide jumbo loans versus conventional loans in most cases. This explains why the requirements are stricter than a smaller conventional loan. 

Interest Rates For Jumbo Loans 

As with most loans, rates vary for jumbo loans as well. Deciding factors can include credit history and debt-to-income ratio, etc. However, mortgage rates are currently reasonably low for jumbo loans, and many people are taking advantage of the current low rates. As a result, the gap between jumbo loan rates and conventional loan rates is getting smaller- and so is the required percentage of a down payment. 

My Thoughts: Interest rates can change for jumbo loans at any given time, the interest rates for jumbo loans currently are very reasonable. 

Other Jumbo Loan Costs To Consider 

Jumbo Loan Costs Address Scoop

Adding to the jumbo loan down payment and interest rates, there are a few extra costs that come with jumbo loans that will likely add up to be more than a conventional loan. 

Therefore, although a buyer may have enough cash reserve to cover monthly mortgage payments and a down payment, they still need to consider closing costs. Since jumbo loans are higher than typical mortgages, the down payment will most likely be higher, too. The process of determining how much a person can afford can be tricky, in these cases, a home loan advisor can assist in determining what a buyer can afford and where to get the best deal with all factors considered. 


Questions To Ask When Considering A Jumbo Mortgage

Taking out a jumbo mortgage without considering all factors is very dangerous. If you are considering purchasing a property that is too expensive for a conventional loan, here are some basic questions that you need to ask yourself first. 

Do I need a jumbo loan? The first thing a buyer needs to do is determine if they qualify for a conventional loan. Finding out the limit of a conventional loan in the area of the home will determine if the buyer needs a jumbo loan or not. 

Do I have cash reserves? It’s risky to finance a jumbo loan. If you are acquiring about receiving a jumbo loan, lenders may ask yous to prove that you have up to a year’s worth of expenses in reserve to qualify for a jumbo loan. This all depends on the situation, the amount of time varies. 

What is my debt-to-income ratio? Your DTI (debt-to-income ratio) is the percentage of your income that goes towards your monthly debts. Part of the debts will be your mortgage. Wells Fargo has a debt-to-income ratio calculator to help find your ratio and determine if you can afford your mortgage. 

Do I have good credit? As mentioned earlier, you will need a credit score of 700 or higher, and the required credit score can be higher depending on certain factors such as the amount of the loan. If you have a crummy credit score, you probably will not qualify for a jumbo loan. 

What is the property worth? You will need to know the value of the property for a jumbo loan as it is rarely a smart idea to pay more than a property than its current value on the housing market, especially before adding all of the extra fees! These can add up fast and be higher than expected with such a large loan amount. 

Can I afford this? The most important step to take when considering a large purchase is to ensure that you have the funds to cover it. The easiest way to get a sense of what you as a homebuyer can afford is to use mortgage calculator. This will help you get an idea of what your monthly payment will be. 


Final Thoughts 

Some home buys require more than the conventional loan limit. Jumbo loans are a type of loan for people who require more than the conventional loan limit in the area they are planning on purchasing a home. 

Knowing important facts about jumbo loans such as their requirements as well as fees is important when considering taking out such a large loan. Empowering oneself to know what is affordable and what isn’t will make purchasing a property that is within budget so much easier.