Jumbo Mortgage Loans

July 14th, 2019

Jumbo elephant

Jumbo mortgage loans are usually confusing to the average mortgage consumer. No one seems to know what defines a Jumbo mortgage loan. And no one realizes that there can be different underwriting guidelines for Jumbo mortgage loans than for non-Jumbo (also called Conforming) mortgage loans.

Jumbo loan amounts may vary county by county.

It is first important to know that there can be three different loan amount categories. There are:

  • Conforming loans, which in 2019 go up to $484,350
  • Conforming “High Balance” loans, which can go from $484,351, to as high as $726,525 if you are in a high cost area.
  • Jumbo loans (also called Non-Conforming loans) are loans higher than the county Conforming loan limit.

You can read this page of the Fannie Mae website to learn more about what is considered a Conforming mortgage loan.

Property type matters

Jumbo loans can also be defined differently if a home is a multi-family home, like a 2-unit home, 3-unit home, or 4-unit home. Multi-family homes have even higher Conforming loan limits than a single family. This changes how a Jumbo loan is defined when it comes to multi-family property.

Confused? That is understandable. Always talk to a very experienced loan officer to navigate all of the variables in the mortgage industry.

Back to Jumbo mortgage loans…

Jumbo loans can vary by state

For some states, such as Alabama, Arizona, Delaware, Minnesota, Maine, Michigan, Texas and Vermont, each county in the entire state has a maximum Conforming loan amount of $484,350. That means in each of those states if you borrow $484,351 or more your loan would be considered a Jumbo loan.

For some other states there are various counties with different maximum Conforming loan amounts. This means in each county a Jumbo loan amount may be different. These would be states like California, Colorado, Idaho, Maryland, Massachusetts and Virginia.

If you were to buy a home in any county in Arizona and needed to borrow $500,000 it would be considered a Jumbo mortgage loan. Whereas if you needed to borrow $500,000 in Montgomery County Maryland it would be considered a Conforming High Balance mortgage loan.

Some of the important requirements you might see in a Jumbo mortgage loan are:

  • Cash reserves: Jumbo loans have cash reserve requirements that require a borrower to have a certain amount of cash leftover after settlement “in reserve”.
  • Cash reserves for property other than the new home. Such as rental property and vacation homes. Or a retained primary residence that may later be sold or rented out after a borrower buys a new property.
  • Debt ratios: debt ratios can be more rigid on Jumbo loans than on Conforming loans.
  • Credit scores: credit score requirements are higher on Jumbo loans than on Conforming loans.

There are numerous Jumbo mortgage guidelines that can be different. There are too many to list in a blog. Getting a mortgage is not a cookie cutter, simple process. It is even more complicated on a Jumbo mortgage loan. Do your homework accordingly. Always talk to a very experienced loan officer to navigate all of the variables in the mortgage industry.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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