A jumbo loan gives you more borrowing power for expensive homes, but the larger loan amount makes finding the best jumbo mortgage rates even more important.
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A jumbo loan is a loan that exceeds the conforming loan limits in your area. The Federal Housing Finance Agency (FHFA) sets conforming loan limits. In 2022, the maximum conforming loan limit is $647,200. If you’re in a high-cost area, the limit is $970,800. Any loan amount above those limits would be considered a jumbo loan.
You can check the limit for your county here.
If you’re buying an expensive home near or in a major city, you’ll probably hear the terms “jumbo loan” and “conforming loan.” A conforming loan meets guidelines and loan limits set by two government-supported enterprises: Fannie Mae and Freddie Mac.
A jumbo loan is a “non-conforming loan,” which means government-sponsored agencies don’t set the qualifying requirements.
Lenders typically set stricter qualifying guidelines for jumbo mortgages. Jumbo mortgage requirements may include:
Because jumbo loans don’t adhere to rules set by a government agency, some lenders offer niche jumbo programs for borrowers with unusual circumstances such as:
Lenders typically hold jumbo mortgages in their loan portfolios, which means they can set interest rates based on their own standards. Shopping for jumbo loan rates may save you thousands, if not hundreds of thousands of dollars over the life of a large loan amount.
You may find big differences in 30-year jumbo rates offered by different mortgage companies, but in most cases you’ll get the best jumbo loan rates by following these five steps:
You should consider a jumbo mortgage if you’re buying an expensive home and need a loan higher than the conforming loan limits in your area.
A jumbo loan allows you to borrow more money than conventional loan programs allow. You can keep some of your cash assets in the bank, and potentially increase your mortgage interest tax write-off.
If you’re buying a single-family home with a loan amount above $647,200 in most U.S. counties (or $970,800 in high-cost areas), you’ll need a jumbo loan.
Yes; jumbo refinance loans work much like conventional, conforming refinances, but set stricter limits for income, credit and credit scores. One tip: Conforming loan limits change every year, so you may be able to avoid the tougher jumbo approval standards by checking the limits in your area annually.
Most jumbo loans are “manually underwritten.” A human underwriter does most of the review, instead of the automated underwriting systems (AUS) typically used for conforming loans.