Jumbo Loans Mortgage Product
Jumbo loans are defined as any loan that is larger than the Conforming Loan limits or does not meet the Conforming Loan guidelines set by Fannie Mae and Freddie Mac (our nation’s two government-sponsored enterprises that purchase Conforming Loans in the secondary market.) For this reason, Jumbo Loans are sometime referred to as Non-Conforming Loans. Jumbo Loan sizes vary depending on the location of the home, but in many metropolitan areas a Jumbo Loan is any loan that is greater than $625,500. Due to the increased risk inherent in larger loan amounts, interest rates on Jumbo Loans are usually higher than those offered on Conforming Loans; they also have more stringent underwriting guidelines.
Underwriting guidelines for Jumbo Loans normally require a larger down payment and a lower debt-to-income ratio. It is also important to understand that due to the increased risk of larger loans, closing costs (e.g. Appraisals, Title Insurance) on Jumbo Loans are normally more expensive than their conventional counterparts.
How It Works:
With the exception of more stringent guidelines and higher costs, Jumbo Loans function much like Conforming Loans. Lending institutions (banks, credit unions, etc.) will make a Jumbo loan and either retain the loan (in their portfolio) or sell the loan on the Secondary Market.
Typically, Jumbo product lines will offer more loan programs than what are offered by Fannie Mae and Freddie Mac. This allows homeowners more flexibility when trying to match their financing terms with their long and short-term financial needs.
Features & Benefits:
- Purchase or Refinance more expensive homes, condos, or townhomes.
- More Loan Programs to choose from.
- Jumbo Loans may be assumable.
- Exceptions can be made on underwriting guidelines (e.g. FICO, LTV, DTI) when compensating factors are present.
- Jumbo Loan Guidelines sometimes allow for alternative income documentation methods.
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