May 7, 2020

When Do You Need a Jumbo Loan?

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If you are looking at homes in the $700-$775k price range, then you could find yourself in the gray area between a conventional mortgage and a jumbo loan. In this situation, some borrowers may be surprised to find that a Jumbo Loan comes with a smaller overall price tag. But how do you know when you need one? First, let’s look at what a Jumbo Loan really is.

What are Conforming vs. Non-Conforming Loans? 

Conforming loans are those eligible for backing by government-sponsored enterprises, like Fannie Mae or Freddie Mac. Loans higher than the conforming loan limit are considered non-conforming, and cannot be guaranteed by government-sponsored enterprises. They are, instead, backed by private lenders. Loans larger than the conforming loan limit are called jumbo loans.

The 2020 baseline conforming loan limit is $510,400. This applies in all but 43 counties across the United States. For areas in which 115% of the local median home value exceeds the baseline (such as Nashville or San Francisco), conforming loan limits will be higher.

When Do You Use a Jumbo Loan?

Jumbo loans can provide a solution for all types of borrowing situations. In this sense, they are just like conventional mortgages only bigger. You can use a Jumbo Loan to refinance your existing home, purchase a home, and even invest in a multi-unit property. They often allow you to take advantage of low jumbo rates, without depleting your cash reserves.  Borrowers have their pick of jumbo loan options, like a 30-year fixed or ARM.

Note, however, that Jumbo Loans cannot be backed by the FHA. But they can be insured through the Department of Veterans Affairs. VA Jumbo Loans come with fantastic benefits for those who qualify.

What Jumbo Options are Available?

At UHL we offer a comprehensive set of Jumbo Loans because we understand that every borrower’s needs are different. For example, our Doctor Loan Program allows new physicians to take out jumbo loans while still paying off medical school. Even first-time buyers have the option to go big and go home! And if you’re thinking twice about purchase price because you are unsure of how much you will need to put down, check out low down payment options.

How Do I Know if I Qualify?

Just as with conventional loans, borrowers will need to show proof of income, cash reserves, and decent credit history. There are some specific requirements, but at the very least, the following criteria will need to be met:

  • A minimum credit score of 700
  • 43% or lower Debt-to-Income ratio
  • At least 10% down

It is important to keep in mind that few obstacles are insurmountable once you are working with a lender. We have the knowledge and experience to guide you through the qualification process. Get a quote or contact one of our mortgage experts today.


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