The median price of a home sold in the U.S. in early 2016 was $188,900. While that might buy you a small castle in some housing markets, in others you will need to borrow a lot more just to get a place big enough for your family to call home. Borrowers that plan on taking out a really large loan on a more expensive home will need to qualify for what is called a “jumbo” mortgage loan.
What is a Jumbo Loan?
A jumbo mortgage loan is any loan that exceeds the “conforming limit” set by Freddie Mac and Fannie Mae. The limit is pretty standard in most areas, but can vary in places where housing is particularly expensive:
- In 2,916 of the 3,143 counties in the 50 states and territories of the U.S., $417,000 is the conforming limit for a jumbo loan
- In 108 of the more expensive housing markets (Los Angeles, San Francisco, New York City, etc.) the limit is $625,500
- In 119 additional counties the limit is somewhere in between, such as Hyde County, NC, where the limit is $483,000
- Hawaii, Alaska, Guam, and the Virgin Islands also have different regulations that allow the conforming limit to be higher
Qualifying for a Jumbo Loan
During the boom of the housing market in the mid-2000s it was pretty easy to find a lender who would provide you with a jumbo loan, even without verifying your income or only putting a small down payment on a huge loan. Times have changed in the wake of the housing market crash, though, and while these home loans are still available, you’ll have to meet much more strict requirements.
Jumbo mortgages today have gone “back to the basics”, according to many lenders, which means you will need to:
- Put around 20 percent down, although there are some exceptions that allow you to get these loans with as little as 10 percent down
- Provide proof of income
- Decide whether you want an adjustable rate (ARM) or fixed rate
- Have a monthly mortgage payment that is at or below 38 percent of your total income (before taxes)
- Have a high credit score—most lenders want credit scores of 720 or higher before they will approve a jumbo mortgage loan
The good news is that if you can meet these qualifications, the interest rates on these loans are generally pretty good.
Who Provides Jumbo Loans?
Unlike smaller loans, which are often packaged together and sold by the bank that underwrite them, these jumbo loans generally remain on the books of the big banks that provide the loans—Bank of America, ING, U.S. Bank, and GMAC Mortgage to name a few. That means you should shop around before settling on a loan because other banks might be offering better rates.
If you are in the market for a jumbo mortgage loan in Utah, talk to American Loans today to find out more about available loans and see if you can qualify. While the regulations and lending standards have tightened, it’s still possible to get these loans with the right qualifications.