In some instances, a conventional mortgage isn’t enough to finance a home. That’s where a jumbo loan* comes in. Jumbo loans are an option for eligible borrowers who are interested in properties that are valued higher than the current conforming loan limits. Effective January 1, the Federal Housing Finance Agency (FHFA) announced that the 2022 conforming loan limits increased to $647,200. This means that any one-unit property valued over that amount would need to be purchased with a jumbo loan. There are high-cost areas across the country where the conforming loan limit may be higher and therefore a loan exceeding $647,200 may not be considered jumbo.
Jumbo loans are perfect for those looking to purchase a luxury property such as a mansion or simply wanting to buy in a high-priced area where home values are steeper than conforming loan limits allow. While jumbo loans can be for a primary home, they can also be used to finance investment properties and vacation homes.
Because jumbo loans are not backed by Fannie Mae or Freddie Mac, they are considered riskier for lenders, which means that the guidelines are usually stricter than that of a conventional loan. For instance, you’ll need a higher credit score along with a lower debt-to-income ratio compared to a conventional mortgage loan. You’re also more likely to be approved for a jumbo loan if you have a large cash reserve. To prove that you’re financially stable, you may also need to provide more extensive documentation compared to a conventional mortgage. This includes tax returns, W-2s, 1099s, bank statements, and all information related to investments.
Aside from the high loan amount, jumbo loans don’t differ much from a conventional mortgage in that borrowers can get fixed- or adjustable-rate jumbo mortgages with various term options. It’s important to remember, however, that jumbo loans are likely going to require a bigger down payment and may sometimes have higher interest rates. Also, because jumbo loans are so much bigger you should expect higher closing costs.
Sometimes bigger is better when it comes to your dream home. For those who require higher loan amounts, our jumbo loan can help you enjoy lower payment options with competitive rates. Contact a Silverton Mortgage professional today and let us help you dream bigger with our jumbo loan program.
*Example of 90% LTV (10% Cash Down) Jumbo Loan with $725,000.00 sales price. $652,500 loan amount – 30-year fixed rate loan with zero points based on 360 monthly payments at $3,306.12 each (P&I only). Monthly payments do not include required mortgage insurance, taxes, insurance premiums or other applicable escrows. Actual payment amount will be higher. 10%
cash down payment of $72,500.00 required. Example assumes 700 credit score and includes $1,295 origination fee, 4.537% APR, and 4.5% interest rate as of 12/17/2020. Rate, fees, other charges and terms subject to change. Available loan programs and terms will vary by state.