Jumbo Loans
Are you a high earner with your sights set on a luxury property? Or is your ideal home priced higher than the limits set by the FHFA? There may be a financing product for when a conventional or high-balance loan doesn’t cut it.
What Is a Jumbo Loan?
A Jumbo Loan is a non-conforming conventional mortgage used for property priced higher than the maximum loan amount set by the Federal Housing Finance Agency (FHFA). The FHFA sets limits on the maximum loan amount for a single-family home depending on average prices in the area. In most US counties, the loan maximum is $484,350, but in higher-priced areas, it’s $726,525, as of 2019. A jumbo loan cannot be purchased by Fannie May and Freddie Mac because it is more than the limit set by FHFA—which the two private companies follow.
Jumbo loans are only available in certain counties and have special underwriting requirements due to the risk involved. A jumbo mortgage can be used to finance a primary residence or investment property, provided that the buyer meets the strict requirements. Surprisingly, jumbo loans often have interest rates comparable to conforming loans, or even lower.
Jumbo Loan Requirements
Jumbo mortgage requirements are much stricter than for conforming loans, as the lender has no protection from losses if the borrower defaults. To start, you’ll need a credit score generally 680 or higher, high earnings, low debt-to-income ratio and abundant cash reserves. In addition, you’ll likely need to prove you have cash to cover up to one year of mortgage payments. Expect a down payment between 10-30% and higher closing costs due to the size of the purchase. Financial documentation like pay stubs, tax returns, W-2s and the like will be required during the application process.
Tax Implications of a Jumbo Loan
Before taking out a jumbo loan, investigate your tax implication with a tax professional to learn if it’s truly the most financially sound financing option for you. As of December 2017, tax law allows property owners to receive a mortgage interest deduction on only up to $750,000 of mortgage debt and a maximum of $10,000 in property tax deductions. It’s possible a jumbo loan will cost you more in interest than two smaller conforming loans.
Getting a Jumbo Loan
At Gulfside Mortgage Services, we offer a 10% down Jumbo Loan with no PMI (Private Mortgage Insurance).
Contact a mortgage expert to learn if you qualify for a jumbo loan and if it’s right for your next luxury purchase. These loans have varying interest rates so it’s important work with a qualified mortgage lender and shop around for the best rate.
