All About Jumbo Mortgage Loans

In many areas of the country, you can buy a nice single-family home for well under $400,000. In other areas, particularly those with high costs of living, single-family homes begin at a half million dollars or more (sometimes much, much more!), especially if you want to live in a neighborhood with high rated K-12 schools or certain other amenities. Even if you live in a lower cost of living state or area, you and your family may be looking to purchase a large or luxury home that exceeds the limits of a standard conforming mortgage loan.

What is a “conforming mortgage loan” and what is the limit on it?

Conforming mortgage loans are loans which conform to the mortgage limits set by Fannie Mae and Freddie Mac. If you apply for a mortgage loan under the loan limit amounts set by Fannie Mae and Freddie Mac, you have a “conforming loan”. If you need a loan that is higher than the limits, your loan is considered to be “non-conforming”. A jumbo mortgage loan is one type of non-conforming mortgage loan.

The limit on most conforming loans for the majority of areas in the US is about $424,000 (for 2017). Jumbo mortgages can exceed those pricing limits. In some high cost of living areas, the limits for conforming mortgage loans are higher so you may be able to qualify for a standard fixed-rate conventional mortgage with a limit of up to just over $636,000.

Is it harder to get a jumbo loan than a standard conforming mortgage loan?

It is not necessarily harder to get a jumbo loan, but there are more restrictions and requirements on jumbo loans than there are on standard conventional mortgage loans. A 20% down payment (or 20% in equity if you are looking to refinance a jumbo loan) will be required. Additionally, most lenders have strict debt-to-income requirements for jumbo loans which require that your total monthly mortgage payment cannot be more than 38% of your gross income (before tax income).

What documents will we need to process your jumbo mortgage loan?

You will need your tax returns for the previous 2 years. Your current and previous paystubs (2 previous pay stubs if you are paid on a weekly basis). If you are self-employed your lender will also need your 1065 federal partnership tax returns and your 1120 corporate income tax returns for the past 2 years, as well as your YTD profit and loss statements and your K-1 and/or S-Corps for the previous 2 years.

If you live in an area of the country where you will be looking at purchasing a single-family home with a mortgage amount over $424,000 or otherwise will be looking to purchase a home within that range, contact an experienced mortgage professional about jumbo mortgage loans today.