Jumbo Loans: For Larger Mortgage Amounts
If you’re looking to purchase a luxury home that is much more than the standard home value in your county, a jumbo loan may be your best option for securing a home loan that makes your purchase a possibility. This is because these types of homes exceed the conventional conforming loan limits set by the Federal Housing Finance Agency (FHFA), which disqualifies them from traditional financing options.
While jumbo home loans are designed for those looking to purchase high-value homes, they are also typically associated with stricter requirements that make them more difficult to qualify for. That said, Griffin Funding is dedicated to making home loans more accessible to borrowers, offering competitive interest rates, more flexible terms, and five-star service.
Learn more about jumbo mortgages and find out if it’s the best way to purchase your dream home.
What Is a Jumbo Loan?
If you are unfamiliar with the different types of mortgage options, you may be wondering, what is a jumbo loan? The jumbo loan definition is that it is a type of home loan that allows borrowers to qualify for a larger loan that exceeds the conforming loan limits, which typically cut off at $726,200 (updated as of 2/21/23) for most counties. Put simply, a jumbo loan, also known as a jumbo mortgage, will offer high-end financing that traditional loans cannot.
Typically, a jumbo loan is recommended for those who are looking into purchasing homes in a highly competitive real estate market (with correspondingly higher prices). Because these properties usually far exceed average listing prices, it’s less likely that even the most financially stable borrowers will have the necessary amount of cash on hand for a traditional loan. Jumbo loans make it possible to purchase these properties by financing a greater value.
Jumbo Loans: Requirements and Qualifications
As mentioned, jumbo loans generally have much stricter requirements because borrowers are being approved for a larger sum. Here are some of the most important jumbo loan requirements and qualifications to make note of:
- Credit Score: Jumbo mortgages are not designed for high-risk borrowers. Instead, they are restricted to those who are fiscally equipped to repay such a large sum. For this reason, a higher credit score may be required. In many cases, this would be a good or even excellent credit score (700 or above).For example, even with an FHA loan—which is typically designed for low-to-moderate income buyers—there are much stricter requirements. A traditional FHA allows borrowers to qualify with a credit score as low as 580. However, with an FHA jumbo loan your credit score must be higher (among other restrictions).
- Debt-to-Income Ratio: The debt-to-income ratio (DTIR) is the percentage of debt you have compared to your income. Typically, the lower your DTIR the better. Some traditional home loans may allow up to 55% DTIR, however, jumbo loan applicants will typically need theirs to be significantly lower. In many cases the required DTIR for jumbo mortgages must be lower than 43%—or sometimes even 36%.
- Cash Reserves In order to qualify for a jumbo mortgage, lenders typically want you to have substantial savings or liquid assets (that can be easily converted to cash)—this should usually be enough to cover several months or even a year’s worth of mortgage payments.
- Documentation of Financial Health Before approving your loan application, your lender will likely request your W2 tax forms and other documentation to verify your income and ensure you have substantial cash reserves. For those who are self-employed, this may be cause for concern as your total income is not always reflected through these types of financial documentation.However, at Griffin Funding, we can verify this information for self-employed borrowers using bank statements, for a more accurate reflection of your financial situation.
- Property Appraisal Before final loan approval on your jumbo home loan, you will typically need to schedule a property appraisal to confirm the value of the property and the soundness of the structure. For jumbo loans, you may also need a secondary appraisal. This is because jumbo loans are typically used to purchase luxury homes, which may be outside the scope of the standard.
- Down Payment How much is a jumbo loan down payment? Typically, a larger down payment will be required for jumbo loans because the lender is taking a larger risk by approving financing on a high-value property. A standard jumbo loan minimum down payment is 20%. However, down payment requirements vary based on personal financial circumstances, the cost of the home, and other loan terms. We do offer jumbo loans with a minimum down payment of 10% in some cases.
Jumbo vs. Conforming Loan Comparison
A jumbo loan is sometimes called a non-conforming or non-agency mortgage. This is because you do not have to follow the guidelines of Fannie Mae and Freddie Mac, which are government-sponsored entities (GSEs) that create standards for down payment, credit score, post-closing reserves, and loan amount.
Federal Housing Finance Agency (FHFA) Limits
For 2023 the maximum amount for a conforming loan is $726,200 due to the FHFA limits. However, unlike conventional, or conforming loans, jumbo mortgages are not required to fall within these limitations. This is why this is the recommended loan type for luxury homes.
Jumbo Loan Rates
What is the jumbo rate? Often, the average jumbo loan interest rate is similar to a traditional loan. However, it also depends on other factors that impact your interest rate (debt-to-income ratio, down payment, etc.).
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 Benefits
For the right borrower, there are a variety of benefits of securing a jumbo loan—above and beyond being able to afford a luxury home.
- Jumbo Loan Rates Offered At Griffin Funding, we pride ourselves on offering our customers competitive loan rates. We can compete directly with the “Big Banks” that traditionally have dominated the Jumbo loan market on a 30-year, fixed-rate jumbo loan. Additionally, with Griffin Funding, you can borrow up to $2MM with 20% down payment or up to $3MM with a 30% down payment on a jumbo home loan.
- Quicker Turnaround Than Traditional Banks Another key advantage of securing a jumbo loan with Griffin Funding is that banks are currently taking anywhere from 60-120 days to process these loans right now. In many cases, we can complete the loan process within 30 days or less.
Have more questions about how jumbo loans work or want to find out if you qualify? Speak with one of our knowledgeable loan officers today.
Apply for a Jumbo Loan Today
Don’t lose hope on purchasing your dream home because it won’t qualify for a regular mortgage. Apply for a jumbo mortgage loan with Griffin Funding. We’ll work with you to make getting a jumbo loan as straightforward as possible.