A jumbo loan, or jumbo mortgage, is a type of financing for properties that exceed the value set by the Federal Housing Agency (FHA). For 2022, the value limit for a conforming loan was set at $647,200 or less for most of the country, but, depending on property values in a state or county, the limit can be as high as $970,800. “Homes in San Luis Obispo County can easily exceed the $647,200 limit,” said Marc Coons, the Paso Robles mortgage lender. “Local property values are one of the things that make FHA jumbo loans an attractive option for home buyers.”
Before looking at the benefits of a jumbo loan, it’s important to know that this type of loan is not eligible for financing or guarantees by Fannie Mae or Freddie Mac. Jumbo mortgages come with unique underwriting requirements and tax implications. Nonetheless, these kinds of mortgages have gained popularity as the housing market continues to increase in overall value.
When is a jumbo loan a good option?
A jumbo loan may be a good option for any of the following scenarios:
- The home you want is appraised at more that $647,200 and your down payment isn’t enough to bring the loan amount lower than that value.
- Traditional lenders are not willing to make the loan even when FHA conforming loan limits for the area are higher than $647,200 in your area.
- If you are considering purchasing property outside of the continental United States, such as Alaska, Hawaii or Guam. The FHA has set the baseline limit for these areas at $970,800.
There may be other circumstances where a jumbo loan is a good option. Consulting with Marc Coons, the Paso Robles mortgage lender before seeking financing is well worth your time. Marc and his team have access to hundreds of lenders who are interesting in making loans in exceptional circumstances.
Is qualifying difficult?
Jumbo loans have the same qualifying factors as a conforming loan such as credit score, amount of the down payment, debt-income-ratio and overall financial status such as how much money is still available after the loan closes. The amount of money available after the loan closes is commonly referred to as “reserves” and can include assets that can be easily liquidated. It’s typical for jumbo loan lenders to want to see 12-months of reserves from various sources.
On the up-side, qualifying for a jumbo loan has some flexibility not normally available with normal loans:
- Income flexibility makes it possible to qualify under flexible employment or self-employment situations. As long as you can demonstrate a solid financial picture with income tax returns you have good changes of qualifying.
- Down payments can be smaller percentages than conventional loans and don’t always require mortgage insurance. However, interest on the loan may be higher than for a conventional loan.
- More liberal debt-to-income ratio than conventional loans, meaning you can have a higher debt ratio. Conventional lenders like to see debt and expenses that don’t exceed around 40% of income. A lender for a jumbo loan may be satisfied with a higher percentage, depending on other factors such as cash reserves and investments.
Work with the expert
Rather than trying to figure out if a jumbo loan is the way to go, give Marc Coons, the Paso Robles mortgage lender a call. With access to hundreds of lenders Marc and his team spend the time with you to fully understand your unique circumstances. There are a variety of types of loans available and many lenders who may be willing to help you.
Serving the Central Coast since 2004, backed by Caliber Home Loans, Marc helps streamline the entre loan process and answers all of your questions:
- How do I qualify for a loan?
- Do I need to prequalify? What if I have some credit issued?
- Where can I get a home loan?
- How long does escrow take?
- What if I make a mistake on the loan application?
- What happens after I turn in the application?
- How do I get the lender to return my calls?
Whether buying your first house, a condominium, a ranch, a small farm, or planning on building or refinancing, Marc Coons and his team of professional loan consultants work for you to make the process as easy as possible and get you the best loan for your future.