Jumbo Loan

Jumbo Loan

A jumbo loan is a type of home or mortgage loan with an amount that exceeds the typical conforming loan limits that are usually imposed by Fannie Mae or Freddie Mac. A jumbo loan is a home or mortgage loan that has a conforming limit for more than $417,000. If a home or mortgage loan is too large it can exceed the conforming limit, therefore it becomes a jumbo loan. Since jumbo loans are considered to be larger than traditional conforming loans, jumbo loans could sometimes have a higher interest rate. A jumbo loan will usually be considered for larger single family residences.


A jumbo loan is different from any other traditional loans because qualifying for a jumbo loan requires a lower debt to income ratio, a higher credit score/profile, a larger down payment, and a higher reserve than most traditional home loans.  Potential home buyers should only consider a jumbo loan if they know that they will have the means to pay off the jumbo loan quickly. Most jumbo loan lenders will consider jumbo loans a riskier type of investment so the jumbo loan lenders may charge a higher interest rate and that is the reason why potential home buyers would want to pay off the loan quickly so they won’t end up paying more money in higher interest costs. A jumbo loan will also come with stricter qualifications and most jumbo loan lenders will usually not invest in these types of jumbo loans if they know that there could be a risk that the borrower will default on the jumbo loan. Since there is usually not a requirement of private mortgage insurance with a jumbo loan, the down payment for a jumbo loan will be larger and the potential home buyers credit score/profile will need to be above a 700. Lastly, potential home buyers of a jumbo loan will need to have at least a six months’ worth of reserve in the bank after closing and the reserve amount will also need to include up to a twenty percent (20%) of the jumbo loan.