Jumbo Mortgage Loan Eligibility
Unlike conforming loans, that have clear eligibility and underwriting guidelines, jumbo loans have fewer rules, and lenders tend to set their own. Some lenders simply want to see your tax returns, while others may ask for considerable paperwork, including bank statements and other financial documents. One lender may offer you a 90% jumbo loan that requires just 10% down, while another might only give you an 80% loan, or perhaps refuse to give you a loan for buying a condominium. In general, both credit score and down payment requirements for jumbo loans vary on a case-by-case basis. Call or email us today to discuss your individual situation.
What is a Jumbo Mortgage?
Like high-balance mortgage loans, jumbo loans are designed for those who want to make a home purchase with a loan that’s larger than the loan limit but need to borrow even more money than what a high-balance loan can offer. In 2021, the conforming loan amount in California is $548,000. However, given the meteoric rise in property prices, even historically affordable counties are seeing a need for mortgages higher than this conforming amount. Hence the new high-balance amount of $822,000. Even with that increase, buyers would have to come up with a huge down payment since home prices are now well above the $1,000,000 in some California counties, especially those in the San Francisco Bay Area.
Jumbo Mortgage Loans Are Non-Conforming
Unlike a standard conforming loan, a jumbo loan is a non-conforming loan. This means it’s not eligible for purchase by Fannie Mae or Freddie Mac because the amount — sometimes millions of dollars — is above the maximum loan limit. It also means you’ll have to get your jumbo loan from a large bank.
Unlike a conforming loan, it’s possible to get a jumbo loan for all sorts of properties, ranging from high-rise condos to log homes, depending on the lender.
Still, before opting for a jumbo loan, know their limits. Compared to conforming loans, interest rates tend to be higher because the larger loan amounts are riskier for lenders. Also, a recent change in tax law now allows home buyers to deduct interest payments on only up to $750,000 in mortgage debt. If you were hoping to take out a large jumbo loan, you could see your tax break shrink dramatically.
Another complication: Jumbo loans are tricky for lenders to sell on the secondary mortgage market because they don’t conform to the same guidelines. So while small, conforming home loans can be bundled and sold to investors as mortgage-backed securities, jumbo mortgages take more effort or they become portfolio loans, meaning that the lenders keep them in-house rather than packaging and selling them in the secondary market.
Rates for jumbo loans vary widely, and frequently. Data suggests differences in jumbo loan rates are about twice as high each day as they are for conforming loans, so check lender rates carefully.
Keep in mind too that sometimes interest rates for jumbo loans are actually slightly lower than for conforming loans. Recently, we have seen rates as low as 2.75% for our A-paper borrowers.
Jumbo Mortgage Loan Solutions Tailored to You
At The Money Market, we have partnered up with the top players in the mortgage industry to bring to you, our esteemed client, the very best jumbo mortgage solution that meets your individual needs.