What is a jumbo loan?
- A jumbo loan is a type of mortgage that exceeds the limits set by the Federal Housing Finance Agency, and is therefore not eligible to be purchased or backed by Fannie Mae or Freddie Mac.
- Hence, jumbo loans are also referred to as “non-conforming” loans.
- They are typically used for purchasing or refinancing luxury homes in highly competitive real estate markets.
- Because there is more money involved, and because these loans are not backed by Fannie Mae or Freddie Mac, jumbo loans carry more risk for lenders.
- In turn, lenders typically impose stricter requirements on borrowers for jumbo loans.
Success Stories (Jumbo Loans)
Sample jumbo loan programs
The key determinative factor as to whether a loan is jumbo is the loan amount. If the loan amount exceeds the following limits by $1, then it is considered jumbo:
- 1-unit property: $548,250
- 2-unit property: $702,000
- 3-unit property: $848,500
- 4-unit property: $1,054,500
Those are the current limits for nearly all counties in Florida (except Monroe County, where the limits are $608,350, $778,800, $941,400, and $1,169,900 for 1-, 2-, 3- and 4-unit properties, respectively.)
Please note that the limits may vary from year to year. For example, in 2021, the limit increased from $510,400 to $548,250 for single-family residences. For the most recent conforming loan limits, visit the Federal Housing Finance Agency’s website here.
Once those thresholds are reached, lenders have many different jumbo loan programs, which may include the following options:
- “Super jumbo” loans (which typically exceed $1 million): As just one example, some lenders offer a jumbo purchase loan up to $5 million (maximum loan-to-value ratio (LTV) of 65% and minimum credit score of 680), or a jumbo cash-out refinance up to $4 million cash out (maximum LTV of 50% and minimum credit score of 700).
- Creative ways to show income: Many lenders allow borrowers to provide bank statements instead of tax returns, and/or utilize assets to show income (e.g., checking accounts, savings accounts, mutual funds, retirement assets), and/or consider less traditional sources of income (e.g., cryptocurrency/bitcoin and short-term rental income (including Airbnb income)).
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