Let’s Talk Loans: Jumbo


What is it? A jumbo mortgage is one that exceeds what is known as the conforming loan limit ($417,000 in many markets, or up to $625,500 in certain higher market value areas like the DC metro area), which is set by Office of Federal Housing Enterprise Oversight (OFHEO) .

Why is that important? In more expensive markets, or for higher end purchases, this allows the option to still receive a mortgage even if they do not meet the conventional guidelines. While the qualification standards are stricter, the spread of interest rates between conventional and jumbo have drawn closer together in recent months making them a more attractive option in the market today.

What are the guidelines? When considering a Jumbo loan, be prepared for an all-around stricter set of guidelines. Generally a jumbo loan requires a lower debt-to-income ratio, a higher credit score, larger down payments (between 20-40%), and higher reserves. The reasons for these strict guidelines are simple: it’s a higher risk to the lender because they are not federally insured.

We hope this has been an informative series to help break down some of the standards and expectations while approaching the thought of buying a home and determining the best avenue for financing. We also have a set of great lenders that we work with on a regular basis who can help and get you started today. Now is a great time to consider speaking with a professional who can get you on the right track, so contact us!



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