Jumbo loans have been made available to the public these days in response to the constantly rising cost of home buying. Specifically, jumbo mortgages are those which are higher than the allowable dollar amount which are placed on homes by loan-servicing organizations like Freddie Mac and Fannie Mae. This causes them to fall into the category of non-conforming loans, which means they are above the allowable limits for many loan servicing organizations.


As of 2018, the conforming limits were set at $453,000 in practically all states of the US, although it is higher in some counties where home prices have been running higher than the national average. Jumbo mortgages come with fixed or adjustable rates just like ordinary mortgages do, and the jumbo mortgage can be used either for a primary home, a vacation home, or even an investment property.


Qualifying for a jumbo mortgage

As you might expect, lenders for jumbo mortgages tend to have stricter guidelines than do ordinary mortgage lenders. The reason for this is that they’re not backed by Fannie Mae or Freddie Mac, so a greater amount of risk is carried on the loan. The main areas of qualification which borrowers must meet to be approved for a jumbo loan include having a larger income, having a larger cash reserve, and having an excellent credit score.
Typically, someone approved for a jumbo mortgage would need a credit score of around 740, although some borrowers can get by with a lower score if they have low debt-to-income ratios. Anyone with both a low credit score and a high debt-to-income ratio is not likely to be approved for a jumbo mortgage. Successful applicants will have to show a solid portfolio of assets which could cover somewhere between six and 12 months of payments, in case anything interrupted their normal flow of income. The down payment on a jumbo mortgage is most likely going to fall somewhere between 10 and 20% of the overall cost of the home.


Why apply for jumbo mortgage?

The chief benefit of applying for a jumbo mortgage is that it will allow you to exceed the limits placed on mortgage lending by Freddie Mac or Fannie Mae. You will still probably be able to get a competitive interest rate, and you will still be able to finance the home of your choosing, while not being confined in any way by the cost of the home. A fairly recent interest rate on jumbo mortgages hovered at around 4.62%, which is a fairly competitive rate that would appeal to home buyers.


Jumbo loans can be an extremely convenient way to get your dream home or property financed. If jumbo loans were not available, a prospective home buyer would be obliged to apply for two separate loans which conformed to national limits. Even home buyers with larger reserves of cash often prefer to apply for a jumbo mortgage rather than tie up a significant portion of their cash reserves. That makes a jumbo mortgage very appealing from both the convenience standpoint, and from a practical standpoint.