Jumbo Loans: When You Need to Borrow More for Your Home

Renee Dupre

June 13, 2022

Are you looking for a new home?

A jumbo mortgage may be the right option for you. Jumbo mortgages are larger than the conforming loan limit set by Fannie Mae and Freddie Mac.

This means that they are available for purchase by borrowers who need more than the typical conforming loan amount.

This post will unpack everything you need to know about jumbo mortgages, including the benefits and eligibility requirements.

What is a jumbo loan?

A jumbo loan is a mortgage used to finance properties outside the typical conforming loan limits. In most counties (or parishes for us here in Louisiana), the maximum amount for a conforming loan is $647,200, according to the Federal Housing Finance Agency (FHFA). A jumbo loan is required when a home’s price surpasses the local conforming loan limit.

Non-conforming conventional mortgages, or jumbo loans, are riskier for lenders since they can’t be guaranteed by Fannie Mae and Freddie Mac, which means the lender is not protected from losses in the case of a borrower’s default. Jumbo loans are generally available with a fixed interest rate or an adjustable rate, and depending on the loan length, they can come with a term of 10, 15, 20, or even 30 years.

What are the benefits of a jumbo mortgage?

A jumbo loan can be a good option for borrowers who don’t mind paying a higher interest rate and want to avoid the hassle (and cost) of getting private mortgage insurance (PMI). Jumbo loans also offer some flexibility that other loans don’t – like the ability to include a second home or an investment property in the same loan.

Another potential benefit of a jumbo mortgage is that you may not be required to get PMI, even if you’re putting less than 20% down. In most cases, lenders will require PMI for any loan with less than a 20% down payment. But with a jumbo loan, since the loan amount is higher than the conforming limit, you may not be required to get PMI.

Of course, every borrower’s situation is different, so it’s important to talk to a lender and compare your options to see what’s best for you.

Want to talk to a lender right now? Give me a call at 504-330-6448 and learn how you can get a jumbo mortgage.

Qualifying for a jumbo loan

Because jumbo loans are larger and riskier for lenders, underwriting criteria have become more stringent.

Here are some of the key qualifying factors:

Image Source: Investopedia

A strong credit score.

You’ll typically need a credit score of 700 or higher to qualify for a jumbo loan. So if your score is on the lower end, you may have a more challenging time qualifying.

A low debt-to-income ratio.

This is the percentage of your monthly pre-tax income that goes towards debts – like your mortgage, car payments, student loans, and credit card bills. For a jumbo loan, lenders typically like to see a DTI of 43% or lower. So if your DTI is on the higher end, you may need to work on lowering it before you can qualify for a jumbo loan.

I have seen lenders be more flexible if you have more cash reserves.

This leads us to…

Cash reserves

If you have a chunk of money in the bank, you’re more likely to get a jumbo loan. It’s not uncommon for lenders to require borrowers with jumbo loans to demonstrate that they have enough financial reserves for one year’s worth of mortgage payments.

Documentation

To prove to your lender that you have the income and assets to qualify for a jumbo loan, you’ll need to provide some additional documentation. This could include:

Your most recent pay stubs
W2 forms from the past two years
Your tax returns from the past two years
Bank statements from the past three months
Proof of any other income, like investment income or rental income
Proof of any assets, like stocks, bonds, and 401(k)s
Your most recent mortgage statement (if you’re refinancing)

So make sure to have all of your documentation in order before starting the application process.

If you’re self-employed…

You may have a more challenging time qualifying for a jumbo loan if you’re self-employed. When you’re self-employed, your income can be more variable and harder to prove to a lender. So if you’re self-employed and thinking about getting a jumbo loan, make sure to talk to your lender about what documentation they’ll need to see.

Need to talk to a lender?

Call me at 504-330-6448 to find out how you can start getting the perfect loan for you!

Appraisals

Depending on the lender, you may also be required to get a second property appraisal. This is to ensure that the value of the home you’re buying or refinancing is equal to or greater than the loan amount. So if you’re planning on getting a jumbo loan, factor in the cost of an appraisal into your budget.

Now that we’ve covered the basics of jumbo loans let’s compare them to conforming loans.

Jumbo Loans vs. Conforming Loans

conventional vs jumbo mortgages houma la

The difference between a jumbo mortgage and a conventional loan is the loan amount.

Conforming loans meet the guidelines set by government-sponsored enterprises like Freddie Mac and Fannie Mae. Jumbo loans, on the other hand, exceed these limits.

Some of the other factors that distinguish jumbo loans from conforming loans include:

Down payment requirements

You can typically put down as little as 3% when you get a conforming loan. But because government-sponsored enterprises don’t back jumbo loans, they usually require a higher down payment – although I’ve seen some lenders go as low as 10%. So if you don’t have a lot of money for a down payment, a conforming loan may be the better option.

Potentially higher interest rates

Jumbo mortgage rates are typically somewhat higher than conforming loan rates, depending on the lender and your financial circumstances.

However, many lenders can provide jumbo loan rates comparable to those on conforming loans — and some may even offer marginally lower interest rates based on market conditions, so don’t forget to shop around.

Higher closing costs and fees

Nothing surprising here. Because the loan amount is higher, you can expect to pay higher closing costs and fees. But just like with interest rates, it’s important to compare offers from different lenders to make sure you’re getting the best deal.

Loan limits

As mentioned earlier, the maximum loan amount for a conforming loan is $647,200 in most parts of the country. But in high-cost areas like Hawaii and Alaska, the limit is $726,525. So if you’re looking to borrow more than $484,350 (or $726,525 in high-cost areas), a jumbo loan may be the right choice.

Because some real estate markets are considerably more expensive than others, the maximum loan size for conforming loans varies by county or parish.

How do you know which category your county (parish) falls into?

Use the map below to see the maximum loan size in your area:

Is a jumbo loan right for you?

If you’re thinking about getting a jumbo home loan or have a few more questions, I can help. I have years of experience helping people finance their homes and over eight years in the business.

Give me a call at 504-330-6448, and I’ll be happy to answer any of your questions.

Or you can complete the loan application below to get pre-qualified for a mortgage:

– Step 1 of 4

Contact Information

Name *

First

Last

Email *

Date of Birth

Social Security Number

Address

Address Line 1

Address Line 2

City

State / Province / Region

Postal Code

Country

Do You:

Own
Rent
Have no primary housing expense

Have you lived at this address for at least 2 years?

Previous Address

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Address Line 2

City

State / Province / Region

Postal Code

Country

Did You:

Own
Rent
Have no primary housing expense

Are you married?

Would you like your spouse's information on the loan?

Please note if you choose no this will limit the programs you approve for.

Spouse's Name *

First

Last

Spouses DOB *

Date

Time

Spouse's Social Security Number *

Spouse's Email

Borrower Phone Number

Co Borrower Phone Number

Current Employer

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Previous Employer

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How are you paid?

Amount

Hours Worked

Do you receive overtime?

How much in overtime have you received in the past 12 months?

Have you received overtime consistently for the past 2 years?

How much in overtime have you received in the past 2 years

Is there a co-applicant?

Co-Applicant Employment Info

Current Employer

Current Position/Title

Date Employment Began

Employer Address

Address Line 1

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City

State / Province / Region

Postal Code

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Employer Phone

Have they been with this employer for 2 years?

Previous Employer

Previous Position/Title

Date Employment Began

Date Employment Ended

Previous Employer Address

Address Line 1

Address Line 2

City

State / Province / Region

Postal Code

Country

Previous Employer Phone

How are you paid?

Amount

Income 1:

Income 2:

Income 3:

Because your income is self-employed, you’ll need to send the past 2 years of tax returns so that La Maison can calculate your income correctly.

File Upload

Click or drag a file to this area to upload.

Hours Worked

Do you receive overtime?

How much in overtime have you received in the past 12 months?

Have you received overtime consistently for the past 2 years?

How much in overtime have you received in the past 2 years?

Bank Name

Current Amount in Account

Do you have a 401k (or equivalent)?

With whom?

Loan Information

Purpose of Loan

I have a property in mind.
I just want so see what I qualify for.

Property Address

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City

State

Zip Code

Sales Price of Property/Home You Want to Purchase

Parish Of Property/Home You Want to Purchase

Who Referred You to La Maison?

Additional Disclosures

California: An applicant, if married, may apply for a separate account. It is illegal to discriminate in the provision of availability of financial assistance for the purpose of the purchase, construction, rehabilitation of any one to four-unit family residences occupied by the owner and for the purpose of the house improvement of any one to four-unit family residence by considering:

1. Trends, characteristics, or conditions in the neighborhood or geographic area surrounding a housing accommodation, unless the financial institution can demonstrate in the particular case that such consideration is required to avoid an unsafe and unsound business practice; or

2. Race, color, religion, sex, marital status, national origin, or ancestry. It is illegal to consider the racial, ethnic, religious, or national origin composition of a neighborhood or geographic area surrounding a housing accommodation or whether or not such composition is undergoing change or is expected to undergo change in appraising a housing accommodation or in determining whether or not, or under what terms and conditions, to provide financial assistance. If you have questions about your rights, or if you wish to file a complaint, contact the Lender or the California Department of Corporations at: 320 West 4th St, Ste 750, Los Angeles, CA 90013, or 1390 Market St, Ste 810 San Francisco, CA 94102

New York and Vermont: In connection with your application for credit, a consumer report may be requested in connection with such application. Upon request, you will be informed whether a consumer report was requested, and if such report was requested, informed of the name and address of the consumer reporting agency that furnished the report. If your application is granted, subsequent consumer reports may be requested or utilized in connection with any updates, renewal or extension of the credit for which application was made or for any other legitimate purpose associated with the account.

Ohio: The Ohio laws against discrimination requires that all creditors make credit equally available to all creditworthy customers and that credit reporting maintain separate credit histories on each individual upon request. The Ohio Civil Rights Commission administers compliance with this law.

Wisconsin: No provision of a marital property agreement, a unilateral statement under Wisc. Stat. 766.59 or a court decree under Wisc. Stat. 766.70 adversely affects the interest of the creditor unless the creditor, prior to the time the credit is granted, is furnished a copy of the agreement, statement, or decree of has actual knowledge of the adverse provision when the obligation to the creditor is incurred.

Additional disclosures may be required for the following states: Texas, New York, Ohio, Oregon.

These documents are separate from this application and must be submitted with the application for the lender to process your request.

Each of the undersigned specifically represents to Lender and to Lender’s actual or potential agents, brokers, processors, attorneys, insurers, servicers, successors and assigns and agrees and acknowledges that:

(1) the information provided in this application is true and correct as of the date set forth opposite my signature and that any intentional or negligent misrepresentation of the information contained in the application may result in civil liability, including monetary damages, to any person who may suffer any loss due to reliance upon any misrepresentation that I have made on this application, and/or in criminal penalties including, but not limited to, fine or imprisonment or both under the provision of Title 18, United States Code, Sec. 1001, et seq.;

(2) the loan requested pursuant to the application (the “Loan”) will be secured by a mortgage of deed of trust on the property described herein;

(3) the property will not be used for any illegal or prohibited purpose or use;

(4) all statements made in the application are made for the purpose of obtaining a residential mortgage loan;

(5) the property will be occupied as indicated herein;

(6) any owner or servicer of the Loan may verify or re-verify any information contained in the application from any source named in the application, and Lender, its successors or assigns may retain the original and/or electronic record of the application, even if the Loan in not approved;

(7) the Lenders and its agents, brokers, insurers, servicers, successors, and assigns may continuously rely on the information contained in the application, and I am obligated to amend and/or supplement the information provided in the application if any of the material facts that I have represented herein should change prior to the closing of the Loan;

(8) in the event my payments on the Loan become delinquent, the owner or servicer of the Loan may, in addition to any other rights and remedies that it may have relating to such delinquency, report my name and account information to one or more consumer credit reporting agencies;

(9) ownership of the Loan and/or administration of the Loan account may be transferred with such notice as may be required by law;

(10) neither Lender nor its agents,brokers, insurers, servicers, successors, or assigns has made any representation or warranty, expressed or implied, to me regarding the property or the condition or value of the property; and

(11) my transmission of the application as an “electronic record” containing my “electronic signature” as those terms are defined in applicable federal and/or state laws (excluding audio and video recordings), or my facsimile transmission of the application containing a facsimile of my signature, shall be as effective, enforceable and valid as if a paper version of the application were delivered containing my original signature. I give permission to Lender to investigate my credit and employment history and authorize my employer, landlord, depository institution, and credit company to release information about me. I acknowledge that my dealer is neither a broker nor a credit grantor.

This application may be considered withdrawn if I do not inquire about its status within 30 days of the date of this notice.

Borrower Signature

Clear Signature

Date

Co-Applicant Signature

Clear Signature

Date

Date / Time

Date

Time

I look forward to hearing from you!

-Renee Dupre, Mortgage Loan Officer

NMLS ID: 1936279

Equal Housing Lender

By submitting this form, you authorize me to contact you at the telephone number or email provided.

Renee Dupre / About Author

Renee Dupre has helped countless home shoppers get financed for the home of their dreams. Her years of experience and dedication to her clients have made her one of the most respected professionals in her field.

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Jumbo Loans: When You Need to Borrow More for Your Home

What is a jumbo loan?

What are the benefits of a jumbo mortgage?

Qualifying for a jumbo loan

A strong credit score.

A low debt-to-income ratio.

Cash reserves

Documentation

If you’re self-employed…

Appraisals

Jumbo Loans vs. Conforming Loans

Down payment requirements

Potentially higher interest rates

Higher closing costs and fees

Loan limits

Is a jumbo loan right for you?

Contact Information

Co-Applicant Employment Info

Loan Information

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