Jumbo Loans

The Jumbo Loan is a highly specialized mortgage product designed for the purchase of high-value or luxury properties that exceed the maximum loan amounts set by the Federal Housing Finance Agency (FHFA). Because these loans cannot be purchased or guaranteed by government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac, they are classified as non-conforming loans.

At The Herd Lending, we understand that financing a high-value asset requires deep industry knowledge and access to specialized capital. Jumbo loans allow qualified borrowers to achieve maximum purchase power, but they come with rigorous underwriting standards tailored to mitigate the higher risk associated with large loan balances.

What is a Jumbo Loan?

A Jumbo Loan is simply a mortgage that exceeds the current conforming loan limit for the county in which the property is located.

Loan Limit Standard: The FHFA sets the conforming loan limit annually, which for 2024 is $806,500 in most parts of the U.S. for a single-unit property. Loans above this figure are considered jumbo.
Non-Conforming: Since they don’t conform to GSE guidelines, Jumbo loans have their own set of requirements established by the private lenders and investors who hold the debt. This means qualification criteria can vary significantly from one lender to another.

Jumbo loans are essential for buyers in high-cost-of-living areas and those purchasing luxury real estate where standard conforming limits are insufficient.

How to Qualify for a Jumbo Loan: Rigorous Standards

Due to the higher principal amount and lack of GSE insurance, Jumbo Loans require a substantially stronger financial profile than conventional conforming loans. Lenders examine a borrower’s complete financial picture, including credit, income, and cash reserves, with intense scrutiny.

Credit Score Requirements

What credit score do you need for a Jumbo Loan?

Jumbo loan qualification demands exceptional credit health.

Minimum Score: The minimum credit score for a jumbo loan is typically 700 or higher. Some lenders may accept scores as low as 680, but this can lead to higher interest rates.
Optimal Score: To secure the most favorable rates and terms, a score of 740 or higher is often required.

Debt-to-Income (DTI) Ratio

Lenders require a very manageable DTI to ensure the borrower can comfortably handle the substantial monthly payment.

Maximum DTI: While some automated conventional loans allow a DTI up to 50%, the maximum DTI for jumbo loans is generally capped at 43%, though some lenders prefer a limit of 38%. A lower DTI can sometimes help compensate for other weaker areas of the application.

Cash Reserves and Documentation

Jumbo loans require significant liquidity (cash reserves) to prove long-term solvency.

- Cash Reserves: Lenders often require the borrower to demonstrate they have liquid assets remaining after the down payment and closing costs are paid. These reserves typically need to cover anywhere from 6 to 24 months of the new mortgage payment (Principal, Interest, Taxes, and Insurance—PITI).
- Documentation: Expect to provide extensive documentation, including two or more years of full tax returns, pay stubs, W-2s, and statements for all checking, savings, and investment accounts.

Down Payment & Mortgage Insurance: Critical Differences

How Much Down Payment for a Jumbo Loan?

What is the down payment for a conventional loan?

Jumbo loan down payment requirements are higher than for conforming loans to offset the increased risk.

Standard Requirement: A minimum down payment of 10% to 20% is standard for most jumbo programs.
Optimal Terms: Putting down 20% or more is highly recommended, as it often qualifies the borrower for the lowest available interest rates.
Low Down Payment: Some specialized jumbo programs may allow down payments as low as 5% or 10% on lower loan amounts, but these require an even higher credit score.

Do Jumbo Loans Require PMI?

Yes, generally they do.

PMI Requirement: Like conforming conventional loans, if your down payment is less than 20% on a Jumbo Loan, you are typically required to pay for Private Mortgage Insurance (PMI).
Alternative Programs: Some lenders offer specialized jumbo products that may waive PMI for down payments of less than 20%, often by charging a slightly higher interest rate instead. However, this varies widely by lender and loan size.
Cancellability: If you do pay PMI, it is cancellable once your loan balance reaches 80% LTV, mirroring the policy for conforming conventional loans.

Features and Assumability

Are Jumbo Loans Assumable?

No, Jumbo Loans are generally not assumable.

As private, non-conforming mortgages, Jumbo loans typically contain the standard “due-on-sale” clause. This clause requires the mortgage to be paid in full upon the sale of the property, preventing the new buyer from taking over the existing loan terms.

Key Benefits of a Jumbo Loan

Higher Loan Amounts: Allows for the purchase of properties far exceeding the FHFA’s conforming limits.
Flexible Terms: Offers a wide variety of terms, including fixed-rate and adjustable-rate mortgages (ARMs), allowing for custom financing strategies.
Diverse Property Types: Can be used to finance primary residences, second homes, and investment properties.

Your Expert Jumbo Loan Partner

Jumbo loans are defined by high thresholds for credit, assets, and income. They require a specialized lending approach that understands the unique risks and documentation needs of high-net-worth borrowers.

At The Herd Lending, we leverage our network and expertise to structure competitive Jumbo loan solutions that align with your complex financial profile. We ensure a streamlined and confidential underwriting process for your high-value purchase.

Ready to finance your high-value property with confidence? Contact The Herd Lending to discuss your Jumbo Loan eligibility today.

Contact Us Today!

Ready to take the next step towards financing your dream home? Call us at (904) 406-7753 or fill out our online contact form to speak with one of our experienced loan officers. We look forward to assisting you in securing the jumbo loan that fits your needs and helps you achieve your homeownership goals.

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