What Is a Jumbo Mortgage?
A jumbo loan mortgage is one whose loan amount is higher than the loan limits set by the FHFA. We're talking homes worth $800,000, $900,000 or even higher price tag in many cases. These loans typically come with a higher interest rate, stricter underwriting rules (including a higher credit score requirement) and require a larger down payment than your everyday home loan.
For a fuller explanation, it is important first to understand the terms "conforming" and "non-conforming" in mortgage lingo. When a home loan is "conforming," that means it fits all the requirements and guidelines set by Fannie Mae and Freddie Mac, the two government-sponsored entities (GSEs) which buy mortgage loans in bulk from lenders like Fairway, then bundle them and, in turn, sell them to investors on the open market.
These bundles, called mortgage-backed securities (MBS), are considered very safe investments because there has traditionally been very little risk of default among the home loans within these bundles. One of the requirements set by Fannie and Freddie is home price; basically, higher home prices are one factor that can increase risk.
If the home is more expensive than the loan limits set by the FHFA, that home loan is considered a little riskier of a proposition than one that falls under the conforming limit, so these "jumbo" mortgages are therefore considered "non-conforming," and are not bundled into MBS alongside conforming loans.
But at Fairway, we don't consider you a risk just because you're trying to buy enough home for your growing family or refinance a jumbo loan! Keep in mind, all the things explained above are happening behind the scenes; they don't really affect you during the home-buying process. Your Fairway mortgage advisor will be able to provide guidance if a jumbo loan best suits your needs and goals.
Jumbo Loan Highlights
If you have good credit, but don't have enough funds on hand to bring your home loan amount under the FHFA's current conforming loan limit, a jumbo home loan might be the right option for you.
- Higher purchase limits allow borrowers to purchase more home
- Convenience of one loan for the entire loan amount, even on larger, more expensive properties
- Jumbo loans are available for primary residences, second homes or rental properties
– Higher down payment requirements for second homes and rental properties
- Jumbo mortgage rates are typically higher than Conventional mortgage rates for conforming home loans and require larger down payments
- Jumbo loans are available in the form of a fixed-rate mortgage or an adjustable-rate mortgage (ARM)
- Jumbo loans are available in the form of VA loans, Conventional, and even renovation loans
Jumbo Mortgage FAQs
How big is a typical jumbo mortgage down payment?
That depends on several factors, including the purpose of the property being financed with the jumbo loan. At Fairway, our core jumbo mortgage program allows for down payments as low as 10% for the purchase of a primary residence, whereas a typical 30-year, fixed-rate Conventional conforming loan allows for a down payment as low as 3%.
But these requirements sometimes shift due to the cyclical nature of the real estate and mortgage markets, and your Fairway mortgage advisor may have access to other jumbo loans programs, so be sure to ask about all your jumbo loan mortgage options as you consult with your Fairway mortgage advisor!
What is a super-jumbo mortgage?
Well, it's not a jumbo loan that was born on the planet Krypton. A super-jumbo home loan is a home loan where the purchase price not only exceeds the FHFA's conforming limits, but also exceeds the FHFA's jumbo limits. Again, these limits are set and reviewed by the government each year.
If you're having this conversation with your Fairway mortgage advisor, we're talking homes that are over $1,000,000 and potentially much higher, especially in areas where real estate costs are generally more expensive.
What is a jumbo reverse mortgage?
Well, a reverse mortgage is a type of home loan reserved for borrowers over the age of 62 who either own their home outright or have significant equity in their home, which can be used to turn a portion of that equity into cash for expenses related to retirement. With that in mind, a jumbo reverse is just a reverse mortgage for a home where the loan amount is higher than the FHFA's current conforming loan limit. Basically, it is a reverse mortgage for a larger, more expensive home.