If you live in one of our nation’s pricier areas or if you want to buy a home significantly above the median price for your area, you’ll probably need a jumbo loan. If you’re not familiar with these types of mortgages, here are some of the frequently asked questions and the answers to help you understand them better.
What is a Jumbo Loan?
The U.S. government’s Federal Housing Finance Agency sets an annual price limit on mortgages they will buy back from lenders. A jumbo loan is anything over that level. For 2022, that means a mortgage higher than $647,200, the new conforming limit. However, in some of the high-cost states, like Alaska and Hawaii, the conforming limit is much higher. It is also higher in expensive areas like New York, Washington D.C., and California. You might not need a jumbo loan in those places, depending on your purchase price.
What is the Maximum Jumbo Loan Amount?
The maximum allowed for a jumbo lender will vary from lender to lender, with current averages topping out between $2 million and $3 million for a primary residence.
What Size Down Payment is Required?
This will depend on your credit score. If you have a FICO score above 720, you’ll likely qualify for a 3.5% down Jumbo loan. If your credit is below that, you’ll probably need a down payment of 5%-10%.
Are Jumbo Loan Mortgage Rates Higher?
Jumbo loans can be higher than conforming mortgages because they typically mean higher risk for the lender. However, interest rates in recent years have become highly competitive and are sometimes even lower than conventional rates. It will depend on the lender and the market.
Do Jumbo Loans Come with Fixed or Adjustable Mortgage Rates?
Both types are available with jumbo loans. An adjustable-rate mortgage (ARM) may be helpful for locking in lower rates and payments for the first few years if you are planning to sell soon, while fixed-rate loans provide consistent rates and payments for those hoping to stay a long time.
Are There Prepayment Penalties?
Jumbo loans do not typically come with penalties for early pay-offs but check with your lender to be sure.
Does the VA Offer Jumbo Loans?
Yes, the VA sponsors jumbo loans as high as $2 million, although individual lenders may have different credit and down payment requirements.
Can a Jumbo Loan Be Used to Purchase a Condo?
Yes, most condos can qualify for jumbo loan funding when they are in pricier areas of the country.
How Long Does it Take to Get a Jumbo Loan?
Getting pre-approved can be as quick as one phone call to a lender, and the closing process with a jumbo loan is not any longer than with a conventional mortgage - typically 25-30 from the time the purchase contract is signed.
How Much are Closing Costs on a Jumbo Loan?
Jumbo loan closing costs are based on the size of the loan, just like with conventional loans. The typical cost is between 2% - 5% of the home purchase price. So if you buy a home for $800,000, you can expect closing costs to add up to between $16,000 and $40,000.
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These materials are not from HUD or FHA and were not approved by HUD or a government agency.