Go big with a jumbo mortgage

If you’re ready to build or purchase a showstopper of a home, or planning to buy within a high-cost area, you may need a Jumbo mortgage to make it happen. Here’s what they are and what they do.

A Jumbo loan goes over the annual conforming limit set by the Federal Housing Finance Agency (FHFA). Currently, the 2021 conforming limit is $548,250 for most counties, although this can go as high as $ 822,375 for pricey areas like San Francisco. Properties that exceed their county’s local conforming loan limit will probably require Jumbo financing.

A typical Jumbo loan may include most, or all of these features:

  • Loan limits to $3 million or more
  • Fixed-rate terms from 15 to 30 years
  • Adjustable-rate mortgages with intro rates lasting from 5 to 10 years
  • Higher FICO score requirements than non-Jumbo loans
  • Higher minimum down payments (although VA Loan applicants may qualify with zero down)

There are two reasons why lenders typically require higher FICO scores and down payments for jumbo loans. One is simple: The higher the loan amount, the higher their potential risk. The other is because Jumbo loans can’t be guaranteed by FannieMae or Freddie Mac, meaning the lender won’t be protected from loss if a borrower defaults. 

If you’ve already been through the approval process for a non-Jumbo loan, you have a pretty good idea what to expect. Here are areas where Jumbo applications may require more (or less!) from you:

Debt-to-Income (DTI) ratio: Lenders want to make sure your Jumbo loan doesn’t risk stressing you and your budget when it comes to monthly payments. This is why many “cap” the permissible DTI for a Jumbo loan at 45% or lower.

Cash reserves: If you have ample cash in the bank, be sure your lender documents it as your “cash reserve”. If you have sufficient cash reserves to cover your first six to 10 Jumbo loan repayments, this will make your lender happy. 

Double dip appraisals: Depending on the type of home you’re planning to purchase, your lender’s underwriter may ask for two property appraisals. This helps ensure you’re not overpaying for the home. An appraisal that supports your home’s price as being “fair market value” is also a plus.

Ready to build that luxury crib you’ve been dreaming of? Thinking of refinancing in a high-cost area?   Contact KBHS Home Loans today. You can rely on us for fast, friendly advice and answers to all your questions.


From KBHS Loans’ web site: 
Jumbo mortgages are available to qualified borrowers who want to finance properties from $453,100 to $3 million. Jumbos come with flexible rates and terms.  Visit our jumbo page.

Back to Articles