Jumbo Loan

What Are Jumbo Loans?

Jumbo loans are mortgages that go beyond the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These loans are used to finance high-priced or luxury properties and aren't eligible for purchase by Fannie Mae or Freddie Mac. Because of this, they typically come with stricter credit, income, and down payment requirements.

When Would I Need a Jumbo Loan?

You would need a jumbo loan if you're buying a home that costs more than the conforming loan limit in your area. This often applies to luxury homes, properties in high-cost markets, or large multi-unit residences. If the amount you need to borrow exceeds the local limit set by the FHFA, a jumbo loan can help cover the difference.

What Are the Differences Between Jumbo Loans and Conventional Loans?

Jumbo loans and conventional loans differ mainly in their loan limits and eligibility criteria:

• Loan Limits: Conventional loans are subject to conforming loan limits set by the FHFA, while jumbo loans exceed these limits, allowing for larger loan amounts to finance more expensive properties.

• Qualification Requirements: Jumbo loans often require a higher credit score, a larger down payment, and more stringent financial documentation compared to conventional loans.

• Interest Rates: Jumbo loans can have higher interest rates than conventional loans due to the increased risk they pose to lenders.

• Loan Eligibility: Conventional loans may be eligible for purchase by Fannie Mae or Freddie Mac, while jumbo loans are not, since they exceed the conforming loan limits.