A jumbo loan is a home loan larger than the conforming loan limit for your county, the cap on loans Fannie Mae and Freddie Mac buy. Because they're outside those rules, each lender sets its own guidelines, which usually means stronger credit, a larger down payment, cash reserves after closing, and full documentation of income and assets. Jumbo loans come in fixed and adjustable rates and can be used to buy or refinance. A jumbo loan is different from a jumbo reverse mortgage, which is for homeowners 62 and older.
In a lot of the places we work, a "normal" house can take a jumbo loan. That surprises people. They hear "jumbo" and picture a mansion. Really, it just means the loan is bigger than the conforming limit for your county.
Jumbo loans work a little differently from conventional loans, and the differences matter most when you're getting ready to apply. Here's what to expect.
If your loan is just above the limit, it can be worth asking whether a larger down payment would bring it under the line. Sometimes a conforming or high-balance loan prices better. See Conventional Loans.
Fannie Mae and Freddie Mac only buy loans up to the conforming limit for each county. Anything bigger has to be held by the lender or sold to private investors. That's why each jumbo lender sets its own guidelines, and why they tend to be stricter.
You can choose:
Some lenders also offer options like interest-only payments for a period, or ways to qualify based on assets rather than pay stubs. Those have their own tradeoffs, and I'll walk you through them if they fit.
Jumbo lenders generally want a stronger credit history than conforming loans require. Your score also affects your price.
Jumbo loans generally require a larger down payment than conforming loans, and the requirement often rises as the loan size goes up. Second homes and investment properties need more.
Reserves are cash or liquid assets you still have after closing, counted in months of mortgage payments. Jumbo lenders often require several months, and more for larger loans or extra properties. Retirement and investment accounts can often count, at a discount.
Expect full documentation: pay stubs, W-2s, tax returns, and bank and investment statements. Self-employed borrowers should plan on two years of tax returns, and business returns may be needed too. Large deposits need a paper trail.
Lenders look at your total monthly debts compared with your income, and jumbo limits are often tighter than conforming ones.
You'll get a Loan Estimate within 3 business days of applying, so you can see every cost before you commit.
Buying. Your down payment, reserves, and documentation are the big three. A clean paper trail on your funds is worth more than almost anything else you can do.
Refinancing. Equity takes the place of a down payment. Rate-and-term refinances generally need less equity than cash-out. If you're refinancing to take cash out, compare it with a home equity loan or HELOC, which can leave a low first-mortgage rate in place. See Home Equity and HELOC and Refinance.
Adjustable or fixed. Many jumbo lenders offer adjustable rates as well as fixed, and your loan officer can compare both for you. If you expect to sell or refinance within the fixed period, an adjustable rate can make sense. If you plan to stay a long time, a fixed rate removes the guesswork. See Adjustable-Rate Mortgage.
Jumbo guidelines vary more from lender to lender than almost any other loan. One lender may need more reserves, another a larger down payment, another a different way of counting self-employed income. As a broker, we can compare more than one lender's jumbo program and match you with the one that fits how your finances actually look.
A jumbo reverse mortgage is a different loan. It's for homeowners 62 and older (in some states, younger) who want to turn equity into cash or a line of credit. There are no required monthly mortgage payments. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms.
It's often compared with a HECM when a home is worth more than the HECM lending limit. See Proprietary (Jumbo) Reverse Mortgages.
Any loan above the conforming limit for your county. Tell me your county, and I'll tell you the current limit.
More than a typical conforming loan, and it depends on the lender, the loan size, and the property type.
Many don't, because the down payment is larger.
Not always. It depends on the market and your profile. Compare quotes priced at the same time.
Yes. Expect to provide two years of tax returns, and some lenders offer other ways to document income.
Yes, to change your rate or term, or take cash out. See Refinance.
Jumbo loans reward preparation. Get a rate quote, see your buying power, or call us at 530-888-6000, and we'll compare jumbo options for your home and your plans. Buying soon? Start with Buy a Home.
