Jumbo Loans

While jumbo loan thresholds vary among lenders regarding the maximum amounts they are willing to lend, the primary concern for most borrowers is determining when a loan crosses into jumbo territory. For 2024, the FHFA has established the conforming loan limit for one-unit properties in most parts of the United States at $766,550, representing an increase of $40,250 from the 2023 limit of $726,200.

This indicates that in the majority of regions across the country, if you require a mortgage exceeding $766,550 in 2024, you’ll need to pursue a jumbo loan. Furthermore, loan limits are higher when purchasing 2- to 4-unit properties.

However, depending on the location of your property purchase, conforming loan limits may surpass the $766,550 threshold for single-unit properties.

Conforming Loan Limits By State – Determining Jumbo Loan Necessity

In most states, the FHFA-mandated conforming loan limit stands at $726,200. Nonetheless, there are states where this limit is higher, allowing for larger mortgages before necessitating a jumbo loan.

The FHFA designates certain areas with notably high housing costs, where the conforming loan limit can reach as high as $1,149,825. Many of these high-cost regions are located in states such as California, New York, Florida, Massachusetts, and Maryland. Consequently, there are parts of the country where mortgages exceeding $1 million remain within the bounds of conforming loans.

Additionally, two states, Alaska and Hawaii, consistently maintain loan limits at the FHFA’s maximum ceiling for the entire country – $1,149,825 for one-unit properties.

Determining Your Local Jumbo Mortgage Limit

Curious about how much you can borrow in your county before requiring a jumbo loan? You can access this information by consulting the FHFA conforming loan limit map. Annually, the agency updates this map, providing a comprehensive list of conforming loan limits by state.

The map employs a color-coded system corresponding to loan limit values, with counties featuring conforming loan limits ranging from $766,551 to $950,000, $950,001 to $1,149,824, and exactly $1,149,825 indicated by distinct color categories.

Fannie Mae and Freddie Mac establish conforming loan limits, dictating the maximum mortgage amount allowable. These limits vary by state and market, with the 2024 threshold set at $766,550 for single-unit homes in most U.S. regions.

In contrast, conforming loan limits extend up to $1,149,825 in Alaska and Hawaii, where housing expenses often surpass the national average. In other high-cost locales, limits are determined on a county-by-county basis.

To ascertain conforming limits in your desired home-buying location, refer to this FHFA map.

Jumbo loans operate under distinct parameters compared to conventional mortgages. These loans entail stringent criteria, encompassing specific requirements regarding property type, down payment, credit score, and debt-to-income ratio.

Property Types:

Jumbo loans offer versatility in property selection since governmental restrictions on usage are absent. Subject to meeting lender prerequisites, most jumbo mortgages can finance primary residences, vacation homes, and investment properties.

Down Payment:

Jumbo loans typically mandate significantly higher down payments than conforming loans. It’s common for lenders to request a 20% down payment for single-family units, with potentially higher requirements for second homes and multifamily properties. The down payment amount is contingent upon factors such as loan size and credit score.

Credit Score:

Credit score plays a pivotal role in securing a jumbo mortgage, serving as a measure of borrower reliability. Scores range from 300 to 850 and are influenced by various factors. The specific credit score prerequisite varies among lenders and loan terms.

For a Jumbo Smart loan, the minimum median FICO® Score required for a 30-year fixed mortgage on primary residences, vacation homes, and investment properties ranges from 680 to 760, contingent upon property type and transaction specifics. A minimum score of 740 is stipulated for a 15-year fixed loan or a Jumbo Smart ARM.

Debt-to-Income Ratio (DTI):

The debt-to-income (DTI) ratio compares an individual’s monthly debt payments to pre-tax earnings. A lower DTI ratio signals sufficient cash flow to cover mortgage obligations, a crucial factor in jumbo loan approval.

Individuals with higher down payments or credit scores may qualify for jumbo loans with elevated DTI ratios.

When lenders face heightened risk, they tend to exercise discernment in selecting borrowers. Consequently, there are specific prerequisites that must be satisfied when applying for a jumbo loan.

Cash Reserves:

To assure lenders of your ability to consistently meet payment obligations, they typically request bank statements demonstrating sufficient funds to cover expenses. It’s common for jumbo loan applicants to be required to maintain reserves equivalent to up to 18 months’ worth of expenses. However, reserve requirements can also be met using various assets, such as retirement accounts, without necessitating a full withdrawal.

Higher Closing Costs:

Jumbo loans incur notably higher closing costs compared to conventional mortgages, typically ranging from 3% to 6% of the total home value. For example, on an $800,000 mortgage, closing costs could amount to $24,000 to $48,000, payable in cash at the closing table.

Consistent Income:

Jumbo loans are exclusively extended to borrowers with stable and predictable income streams. Lenders frequently request extensive documentation, including 2 or more years’ worth of W-2s, tax documents, and 1099s, to assess income stability. Unlike conventional loans, jumbo loan applicants may be subjected to heightened scrutiny, requiring additional proof of income stability to secure the loan.

Manual Underwriting:

Jumbo loans often undergo manual underwriting processes, entailing meticulous examination of credit reports, assets, and bank statements by financial experts. Past financial missteps, such as bankruptcy or foreclosure, may pose challenges in obtaining approval for a jumbo loan.

To provide you with comprehensive insights into jumbo loans, we’ve compiled responses to some commonly asked questions regarding this mortgage type.

What constitutes a jumbo mortgage?

A jumbo loan refers to any home loan surpassing the conforming loan limit. This limit, determined by Fannie Mae and Freddie Mac, varies based on location and may fluctuate annually.

What is the minimum threshold for a jumbo loan?

The minimum threshold for a jumbo loan varies annually and is contingent upon the property’s location. In 2024, a jumbo loan for a single-unit property in most areas of the U.S. encompasses any loan exceeding $766,550.

Is a jumbo loan classified as a conventional loan?

Jumbo loans fall under the category of conventional loans as they lack federal government backing.

Can I pursue a jumbo loan refinance?

Certainly, you can pursue a jumbo loan refinance provided you meet the lender’s eligibility requirements. The loan limits and equity prerequisites for jumbo loans offered by Rocket Mortgage are contingent upon the loan’s intended purpose.