Jumbo Loans: Explore Jumbo Mortgage Options

Jumbo loans are designed for homebuyers looking for a loan amount that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). Jumbo loan borrowers often use this financing to buy luxury homes or properties in expensive markets. In many cases, using a jumbo loan is easier than combining multiple loans to purchase the home you want.

• Stricter qualification requirements: Lenders typically require higher credit scores (often 700+), lower DTI ratios, and larger cash reserves, making it more difficult to qualify.
• Larger down payment needed: Many lenders require at least 10-20% down, which can be a significant upfront cost compared to conventional loans that allow for lower down payments.
• Higher closing costs and fees: Jumbo loans often come with higher origination fees, appraisal costs, and stricter underwriting, increasing the overall cost of obtaining the loan.
• Potentially higher interest rates: While competitive rates are possible, some borrowers may face higher interest rates compared to conventional loans, especially if they have borderline qualifications.

For those who nearly qualify for a jumbo loan but fall just short of the required limits, a near miss jumbo loan could provide an option to secure financing, though it may come with slightly higher rates or stricter terms.

In today’s market, most jumbo loans are 30 year or 15 year fixed-rate mortgages. An adjustable-rate mortgage is one where your interest rate is set for a certain number of years (usually five or seven) and then after that period, the interest rate can increase or decrease based on market conditions. A fixed-rate mortgage is a loan that maintains the same interest rate over the life of the loan, whether that’s 15 or 30 years.

Jumbo loan rates are typically comparable to conforming loan rates, but several factors can influence the exact rate a borrower qualifies for. When comparing jumbo vs. conventional loans, lenders assess financial stability, market conditions, and loan specifics to determine the level of risk and set appropriate interest rates.

• Credit score: Borrowers with higher credit scores (typically 700+) are more likely to secure lower interest rates, while lower scores may result in higher rates or stricter loan terms.
• Loan amount: The size of the jumbo loan can affect rates, as larger loans may carry slightly higher interest rates due to increased lender risk.
• Down payment: A larger down payment (typically 20% or more) can help lower the interest rate by reducing the lender’s risk.
• DTI ratio: A lower DTI ratio (below 43%) demonstrates financial stability and can help borrowers qualify for more competitive rates.
• Fixed vs. adjustable: Fixed-rate jumbo loans often have higher initial rates compared to adjustable-rate jumbo loans (ARMs), which may start lower but can increase over time.
• Market conditions: Interest rates fluctuate based on economic factors, Federal Reserve policies, and overall demand in the mortgage market.
• Cash reserves: Lenders may require 6-12 months of cash reserves to cover mortgage payments, and having more reserves can result in better loan terms.

The minimum down payment for a jumbo loan is typically 20%. At Griffin Funding, we have non-QM flex jumbo loans available with down payments as low as 10%. However, the exact down payment requirement depends on your financial profile and loan details. 

Factors that can impact your required down payment include: 

• Credit score 
• Loan amount 
• DTI ratio 
• Property type and occupancy 
• Cash reserves available

Yes, you can refinance a jumbo loan. Homeowners may refinance their jumbo loan in order to lower their rate, change their loan term, switch from an ARM to a fixed-rate loan, or exchange their equity for cash. 

In most cases, jumbo loans don’t require PMI, even when a borrower puts down less than 20%. Rather than using PMI to manage risk, jumbo mortgage lenders typically mitigate risk by imposing stricter qualification standards and requiring cash reserves.