Jumbo Mortgages
A jumbo home loan, also known simply as a jumbo loan, is a type of mortgage that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These loan limits are established annually and vary by county, reflecting the average home prices in the area.
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Here are the key characteristics of a jumbo home loan:
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Loan Amount: Jumbo loans are used to finance properties that require loan amounts higher than the conforming loan limits. As of 2024, the conforming loan limit is set at $647,200 for most areas in the contiguous United States. Loan amounts above this limit typically qualify as jumbo loans. Counties in higher priced demographics may have higher loan limits.
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Higher Loan Limits: Jumbo loans allow borrowers to finance properties that exceed the maximum loan limits set for conventional or government-backed loans, such as FHA, VA, or USDA loans.
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Credit Requirements: Because of the larger loan amounts involved, jumbo loans often require higher credit scores and more stringent underwriting criteria compared to conforming loans. Lenders may also require larger down payments to mitigate risk.
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Interest Rates: Jumbo loans typically have higher interest rates than conforming loans, reflecting the increased risk to the lender due to the larger loan amount and potentially higher default risk.
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Down Payment: Jumbo loan requirements for down payments can vary widely by lender and borrower profile. While some lenders may require as little as 10% down, others may require 20% or more, depending on the borrower's creditworthiness and financial situation.
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Property Types: Jumbo loans can be used to finance a variety of property types, including primary residences, second homes, and investment properties.
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Additional Requirements: Lenders offering jumbo loans may impose additional requirements such as reserves (cash reserves held in savings or investment accounts after closing), stricter income verification, and specific appraisal standards.
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Jumbo loans are typically used by borrowers seeking to finance high-end properties or homes in expensive real estate markets where home prices exceed the conforming loan limits.