Jumbo Loans
A jumbo loan is a type of mortgage loan that exceeds the conforming loan limit set by the Federal Housing Finance Agency (FHFA). Conforming loan limits are the maximum loan amounts that Fannie Mae and Freddie Mac, the government-sponsored enterprises that buy and sell mortgages, can purchase from lenders.
In 2021, the conforming loan limit for a single-family home is $726,200 in most areas of the United States. Jumbo loans are typically used for higher-priced homes or properties located in areas with high housing costs. The loan amount for a jumbo loan can vary based on the borrower’s financial situation and the lender’s underwriting standards, but it is generally higher than the conforming loan limit.
Jumbo loans often have stricter underwriting requirements than conforming loans, as they are considered higher risk for lenders. Borrowers typically need to have a strong credit score, a low debt-to-income ratio, and a significant amount of savings or assets to qualify for a jumbo loan. Lenders may also require a larger down payment and a more extensive appraisal process for the property.
Jumbo loans can have either fixed or adjustable interest rates, and they may require a higher interest rate compared to conforming loans due to the increased risk to the lender. Jumbo loans are available from many lenders, including banks, credit unions, and mortgage companies.
Borrowers considering a jumbo loan should carefully evaluate their financial situation and consult with a mortgage professional to determine whether a jumbo loan is the right option for their needs. They should also be prepared for a more extensive underwriting process and potentially higher interest rates and fees.