A jumbo loan is known as a “non-conforming” mortgage because it is for an amount that exceeds the conforming limits regulated by two federally sponsored enterprises. Jumbo loans are available for new home purchases and refinancing.
Jumbo loans are quite common. What makes them different from conforming loans is rather than meeting guidelines established by Fannie Mae, the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corporation, the lender sets the guidelines. These loans with a different set of guidelines, or requirements for getting one, are important because average home prices vary widely across the United States, within states, and even cities and communities. The limits are based on average home prices.
By comparison, conforming loan regulations are government-sponsored enterprises that buy or secure mortgages from lenders like investments. This helps make more money available to lenders they can then use to provide new loans to more borrowers. The regulations they establish are designed to create fairness to borrowers by establishing uniform mortgage documents and national standards for mortgages. In other words, you might consider jumbo loans to be a bit riskier than a conforming loan, but PrimeLending is here to guide you through those waters.
How to qualify for a jumbo loan
As with any standard mortgage loan, jumbo loans come with a series of steps to take. Some of the major qualifications include:
- A debt-to-income ratio lower than 43%
- A credit score above 700
- Cash reserves—it’s not uncommon for some borrowers to ask for proof that you have enough money in the bank
- Financial documentation that extends beyond a conforming loan, including full tax returns, W-2s and 1099s.
A jumbo mortgage is a great option for many borrowers, and PrimeLending is the perfect partner to guide you through the application process. Ultimately, jumbo loans have the same overall qualifying methodology as conforming loans even though you’re looking at a higher dollar amount.
Why should I get a jumbo loan from PrimeLending?
There are multiple reasons to apply for a jumbo loan from PrimeLending, which are there to meet the needs of all types of borrowers . Here are just some of the benefits:
- We offer loans up to 80% of the home’s value that require 20% down1
- Fixed-rate and adjustable-rate jumbo loans are available
- Some jumbo loan programs allow down payments in the form of a gift
At PrimeLending, we know that buying a home is unique for everybody. Just because the home prices on a jumbo loan are high, it doesn’t necessarily mean the borrower is particularly wealthy. Not everyone has the same needs, budgets, advantages or options. Often, you’re at the mercy of the market, which is different depending on where you live. That’s what makes a jumbo loan so appealing. That $500,000 house in a small town in the Midwest could be quite extravagant, but a house for the same cost in parts of California could be quite modest. Many jumbo loan borrowers need this type of mortgage to buy large, expensive homes. But for others, this loan is used by a wider range of people looking for a mortgage in a housing market where the home prices are high, well above the local or national average.