Home prices have been skyrocketing in many markets across the nation. If you’re in Seattle, New York or San Francisco, the first question you might ask about your future home is: Even if I can afford this house, who would give me a mortgage for half a million dollars — or more?
The answer is: Not necessarily the bank down the street. Ask a Lender can help you find and compare lenders who specialize in funding large loans, aka jumbo loans, so you’re not stuck with a loan that is more expensive than it needs to be.
Because interest charges and loan fees are charged as a percentage of the loan amount, a larger loan results in higher interest payments and origination costs. That’s why, when taking out a jumbo mortgage, it’s especially important to compare lenders.
Ask a Lender is a Seattle-area tech startup that analyzes more than 6,000 distinct data points to match you with mortgage lenders and brokers. This technology can help you compare lenders and choose the one offering the best interest rate and loan terms.
Go ahead and compare lenders now. Or learn more about the meaning and requirements for a jumbo loan.
Large mortgages are jumbo
Be familiar with the jargon: Large, jumbo or non-conforming all describe loans that don’t fit the loan limits set forth by Fannie Mae and Freddie Mac. Fannie and Freddie will only buy loans from lenders below set limits, so loans that exceed them are more difficult to find. This also is the case if you are refinancing a mortgage that falls beyond the loan limits.
So, what are the conforming-loan limits? Conforming loans for single-family residences have a loan limit of $453,100 in most parts of the United States. High-cost markets, like San Francisco or New York, have a higher limit of $679,650.
If you want to take out a loan to purchase or refinance a home with a loan amount that exceeds those limits, you need a lender who offers jumbo loans; not all lenders do. Because lenders can’t sell jumbo loans to Fannie and Freddie, they generally are offered as “portfolio loans.” This means the bank uses its own money to fund the loan, and then keeps it as part of their portfolio instead of selling it.
Lenders typically offer jumbo loans up to $3 million. Some lenders go as high as $5 million and a smattering may offer loans up to $10 or $25 million. The interest rates on jumbo loans may vary more widely than conforming loans — another reason it’s important to compare lenders before committing to a loan.
How to qualify for a jumbo loan
Now that you know what a jumbo loan is, how do you get one? Requirements for qualifying for a jumbo home loan include:
- Strong credit. Lenders typically require a FICO score of 700 or higher.
- Down payment. Lenders typically require at least 20 percent down, but some lenders now offer jumbo loans with as little as 10 percent down. Ask a Lender can match you with lenders offering jumbo mortgages with lower down payments.
- Appraisals. Many lenders require two appraisals for jumbo loans because of the difficulty of pinning down the value of higher-priced homes.
Getting the best rate
Finding the right lender is essential. Comparing lenders can yield a better interest rate, and when you’re talking about jumbo loans, a difference of just a quarter of a percentage point can save you thousands of dollars. Ask a Lender can help throughout this journey.
The goal is to empower consumers to find the best lenders and the best rates, says Brian B. Simmons, CEO and co-founder of Ask a Lender.
“The financial decision that has the biggest implications for your ability to save money is loans, because they’re so costly,” Simmons says. “We’re giving people the power to find and compare lenders, make those lenders compete for their business, and save a lot of money in the process.”