A jumbo loan is a type of mortgage loan that exceeds the conforming loan limits established by the Federal Housing Finance Agency (FHFA). These conforming loan limits are the maximum loan amounts that government-sponsored entities like Fannie Mae and Freddie Mac can purchase or guarantee. Jumbo loans are, therefore, larger in size than conforming loans and are typically used to finance high-value properties. Here are some key features and considerations for jumbo loans:
- Contract Duration: Typically 30 to 35 days from offer acceptance to closing, offering a relatively quick turnaround.
- Credit Score Requirements: Minimum 680, best for 740 and above.
- Down Payment: as low as 5% down payment, more favorable rates with higher down payment. 20% down payment is recommended.
- Loan Amounts: Jumbo loans are characterized by their high loan amounts, which vary by location. In most areas of the United States, the FHFA sets conforming loan limits annually. Jumbo loans typically start where these limits end.
- Reserve Requirement: Lenders require borrowers to have a reserve of at least 6 months’ worth of funds, adding a financial cushion.
- Property Types: Jumbo loans can be used to finance various types of properties, including primary residences, vacation homes, and investment properties. They are commonly used for luxury homes or properties in high-cost areas with elevated real estate prices.
- Compensation: Both lender and Borrower paid compensation