Definition of a Jumbo Mortgage

As mortgage lenders we really specialize in different types of home loans. Jumbo mortgages are one of them and they are defined by a loan amount that exceeds the maximum amount that Fannie Mae and Freddie Mac will loan, otherwise called the conforming loan limit. Currently, the conforming loan limit is set at $417,000, so if you are looking to obtain a mortgage above that amount, you must either pay for anything over $417,000 in cash or obtain a jumbo mortgage. So the consequence, unlike conventional loans, it is not qualified to be purchased, securitized or guaranteed by Freddie Mac or Fannie Mae. This mortgage type is intended to finance homes that are in competitive local markets and magnificent properties. Jumbo mortgage has its own exclusive underwriting necessities and tax implication.

Benefits of a Jumbo Mortgage

Jumbo mortgages have one main benefit and that is the ability to obtain conventional financing above the conforming loan limit of $417,000.

Other Jumbo Mortgage Considerations

Tighter Qualification Standards

Jumbo mortgages have more stringent qualification standards than most other mortgages because the lender is taking on more risk by loaning a higher balance. Additionally, because payments are higher, more income and lower debt-to-income ratios are also generally required. This means that if you are looking at a home that is close to $500,000 or half a million and up and you don’t have that much in your back account it is most likely that you are going to need a jumbo mortgage.

Part of obtaining this type of loan is proving that you have You’ll need to prove you have cash readily available so you can make all your jumbo mortgage payments on time. These payments are probable to be high if you choose the regular 30 year fixed rate mortgage loan. Exact income amounts will vary depending on the total amount of the mortgage, but anyone purchasing a home with the jumbo mortgage loan will need to provide pay stubs going back 30 days and W2 forms as far back as 2 years.

Higher Pricing

Jumbo mortgages typically have between a 0.25% to 0.75% higher interest rate than other mortgages as well. This is further risk protection placed by the lender.