We are talking about jumbo loans today and what you Need to know. let’s start with what is A jumbo loan is one way to buy a high-priced or luxury home. If you have a lower debt-to-income ratio, a higher credit score, and a larger down payment, a jumbo loan may be right for you. The limit on conforming loans is $417,000 in most areas of the country, but jumbo mortgages can exceed these limits.
What is considered a jumbo loan?
A loan is considered jumbo if it exceeds the conforming and conforming high-balance loan limits:
- The current conforming loan limit for a single-family home is $417,000 for all states—except Hawaii and Alaska, where it is $625,500
- In federally designated high-priced markets in the continental United States, conforming high-balance limits range from $417,001 to $625,500 and, in designated markets in Hawaii, from $625,501 to $721,050. To note, conforming high-balance loans typically have higher interest rates, stricter underwriting and larger down payment requirements than standard conforming loans, but are generally priced lower than jumbo loans. Additionally, limits may be different for multi-unit properties.
How much is a jumbo mortgage?
For years, the interest rates on jumbo loans were consistently higher than the rates on conforming and FHA mortgages. But that changed during the recovery from the mortgage and real-estate meltdown of 2007 and 2008. Since then, interest rates on jumbo loans have often (but not always) been lower than rates on comparable conforming loans. One main reason: Lending standards for jumbo loans tend to be more strict, with bigger down payments required.
In most (but not all) U.S. counties, any mortgage of more than $417,000is a jumbo loan — and jumbo mortgages have higher interest rates than smaller loans. In counties with high home prices, borrowers are able to get mortgages for more than $417,000 without paying the higher jumbo interest rates.