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Jumbo Loan Definition

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Jumbo Loan Definition

Jumbo mortgages are a good solution for borrowers who are looking to buy a higher-priced home. A jumbo loan is one which is higher than the conforming loan limit for the county or state. For most areas of the country, loans above $484,350 are considered Jumbo. At RK Mortgage Group we offer some of the most versatile jumbo loan programs in the industry at a lower rate.

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What is a jumbo loan and should you use one to purchase your home? Jumbo mortgages are intended for financing a property whose value exceeds conforming limits as defined by the Federal Housing Finance Agency. If the home you are purchasing is over this limit you will not be able to secure a conventional mortgage loan. Jumbo mortgages cannot be purchased or guaranteed by Fannie Mae or Freddie Mac and as a result represent significantly more risk for lenders.

What Is a Jumbo Loan?

How much is a jumbo loan? In 2019 the maximum limits for one-unit homes is $484,350 for most of the country. There are exceptions to this in “high cost” areas that can get conventional financing for amounts up to $726,525. 

If you are unsure of the conforming limit in your area one of our loan specialist can advise you and show you programs tailored for your individual situation. If you’re asking the question “what is a jumbo loan” there is a good chance you’ll need one and having a trusted adviser can save you thousands of dollars.

If you’ve already found a home where the purchase price is more than half a million dollars, chances are the answer to the question “what is a jumbo loan” is quickly followed by “how can I qualify for a jumbo loan?” Because these mortgages are not backed by Fannie Mae or Freddie Mac qualifying can be more difficult. 

There is more credit risk for lenders without the government guarantee. As a result, these loans often come with higher interest rates and fees. In recent years, the market has opened significantly with private lenders that offer more competitive rates so it does pay to shop around from a variety of lenders.

Following the housing crisis, you needed stellar credit and very little debt to be approved. Today there are programs for credit scores as low as 620 and debt to income ratios as high as 50%. There are even stated income and bank statement loans available if you are having trouble documenting your income.

Many lenders require documenting sufficient income from your employment to demonstrate your ability to repay the mortgage. If you are self-employed worker or receive a large portion of your income from investments there are exciting new programs for stated income and bank statement loans. 

In general, the more income you can document from pay stubs, W2s and tax returns the easier in will be before relying on bank statements to document your income. If you have liquid assets that qualify as cash reserves of at least six month’s worth of mortgage payments you can have an easier time qualifying for the lowest rates and fees.

What is a Jumbo Loan Down Payment?

Another requirement that has been relaxed significantly since the housing crisis is the down payment needed to purchase a home with a jumbo mortgage. In the past, you were required to bring 30 percent or more to the closing table. Today you can find private lenders offering jumbo mortgage programs with a minimum borrower contribution of 5 percent.

More mainstream lenders may still require as much as ten to fifteen percent; however, rate shopping from private “boutique” lenders can save you a significant amount of money.

Is your head swimming yet? If this more than you bargained for by asking the question “what is a jumbo mortgage” one of our mortgage specialist can help by matching you with the right program, contact us today for a personalized consultation.

Jumbo Mortgage Rates

The good news is that interest rates for jumbos are much closer to what you would expect with traditional, conforming lending. You’ll have a choice of fixed or adjustable interest rates depending on your needs.

If you need the stability of a monthly payment that never changes a fixed rate jumbo offers predictability and security. If you need the lowest payment possible, adjustable rate mortgages offer low fixed rates and payments during the introductory period and will later adjust based on the type of adjustable rate mortgage you choose.

Like conforming adjustable rate mortgages, jumbos are available with fixed periods of three, five, seven, or ten years. Remember that at the end of the fixed period your mortgage will adjust every year and so will your payment amount. 

Am I a Good Candidate for a Jumbo Mortgage?

These mortgages are intended for borrowers with high income and not a lot of assets. Often referred to as “high earners, not rich yet,” these borrowers may have had cash flow problems in the past or struggled with credit challenges. 

If you are in the market to purchase a home in excess of half a million dollars jumbo mortgages are one option available to you. There are a variety of programs available from private lenders for a variety of financial backgrounds and challenges. If you’ve got the income and can afford the payments chances are there is a lender out there willing to finance your mortgage. You can learn more about your options for purchasing or refinancing a home with a jumbo mortgage by contacting one of our licensed loan specialists.

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