Jumbo Mortgage Rates, Rules & Loan Limits in 2018
Where conforming mortgage loan limits end, jumbo loans begin. Jumbo mortgage loans are home loans too big to be backed by the government. There’s a lot more you can do with jumbo loans — even when your loan is below your local loan limit.
What Is A Jumbo Mortgage Loan?
A jumbo mortgage is a mortgage too big to be backed by the U.S. government.
Jumbo loans are sometimes called non-conforming loans because they fail to conform to the mortgage loan size limits of government-backed mortgage groups Fannie Mae and Freddie Mac.
Loan size limits are vary by U.S. county, and by home type.
The standard mortgage loan limit for a single-family house, condo, or town home is $453,100 nationwide, with extended limits of up to $679,650 in areas deemed “high-cost”.
A high-cost area is a region where homes are generally more expensive as compared to the United States as a whole.
A sampling of regions where U.S. mortgage loan limits are extended includes San Francisco, Los Angeles, San Diego, and most of California; New York City’s five boroughs of Manhattan, Brooklyn, Queens, Bronx, and Staten Island; and Washington, D.C. and its Maryland and Virginia surrounding counties.
There are 220 high-cost U.S. counties with higher mortgage loan limits.
This year’s limits are an uptick from 2017, when the standard 1-unit conforming loan limit was $424,100; and, 2016, when the standard conforming loan limit was $417,000.
Loan limits rise as U.S. home prices rise, which explains why home buyers have a higher threshold before tripping the 2018 jumbo mortgage loan limits nationwide.
What Are Mortgage Loan Limits Where I Live?
How Jumbo Loans Work
You borrow some amount of money, and each month you make payments to your lender based on three traits of your loan:
- The size of your mortgage, in dollars
- The interest rate assigned to your mortgage
- The term of your loan, in years
When your loan is paid-off, you’re done with your mortgage. There are no more payments due, and you own your home free-and-clear.
All mortgages work this way once they’re approved.
How mortgages get approved, though, is what makes them all different; getting an FHA loan approved is different from getting a VA loan approved.
When a home buyer wants to use an FHA loan to buy a home, for example, it’s required to make a down payment of 3.5 percent, which must come from the buyer’s own money or a cash gift for down payment.
If that same home buyer used a VA loan to buy a home, no down payment would be required at all.
Mortgage rules are defined within mortgage guideline documents. Mortgage guidelines are comprehensive checklists that lenders use to approve loans.
Applicants that “check all the boxes” get their mortgage loan request approved.
And, this is where non-conforming loans differ from other types of loans.
How Jumbo Loans Are Different From Non-Jumbo Loans
Lenders make millions of mortgage loans each year and just 4% of them are jumbo.
Within this small subset of loans, we find mortgage lenders designing, approving, and funding loans meant for niche segments of the market.
Lenders tend to keep these niche loans on their books, too, collecting payments on them over the long-term. It’s why non-conforming loans are sometimes called portfolio loans — they’re loans designed to be investments.
The niche-y world of non-conforming loans creates opportunities for home buyers and homeowners who might otherwise not find financing.
Some portfolio loans, for example, are designed for doctors and require no money down on a purchase. Others have no maximum loan size limit and waive income verification for retired mortgage applicants.
There are hundreds of non-conforming loan programs available, but because lenders don’t advertise nationally, it can be hard to find what you need.
When your mortgage lender can’t — or won’t — do a jumbo home loan for you, don’t give up on it. Find another lender instead.
The hardest part of getting your jumbo loan approved can be knowing where to get it.
How Do You Get Approved For A Jumbo Mortgage?
There are three basic steps in a jumbo mortgage approval, and they’re the same steps you follow for a non-jumbo mortgage loan approval:
- Research your options and choose a mortgage lender
- Share the supporting papers required for your approval
- Wait for your lender to review and sign-off on your loan
Non-conforming loans are different, though, because lenders keep them “on the books” as investments and to collect interest on them. They’re portfolio loans.
Portfolio loans aren’t sold through Wall Street; nor are they approved to loan standards set by a government agency.
Lenders decide what kind of portfolio loans they want to offer, and they set the mortgage guidelines for each of the programs.
Some of the guidelines are lenient.
What To Expect With Your Jumbo Mortgage Application
Getting a jumbo loan approved starts with giving an application.
Giving a jumbo mortgage application can be quick or time-consuming, depending on what you’re trying to accomplish with your mortgage.
For home buyers who make a down payment of twenty-five percent or more; who have a good income that can be verified; and, who show an above-average credit score, getting approved is straight-forward and fast.
With proof of down payment funds via a bank statement, proof of income via W-2s and recent tax returns, and proof of good credit scores via a credit report, approvals can be immediate.
Other non-conforming loans are more gray-area, and that’s okay. Non-conforming loans exist because not everyone’s finances are in black-and-white.
You can do a lot of interesting things with non-conforming mortgages.
For example, there’s a Doctor’s Loan program, which makes jumbo loans to doctors. Via the program, you can borrow up to $2 million for a home and make a down payment of just ten percent. Mortgage insurance is not required.
You can also use non-conforming loans to close a loan in trust.
Programs like these aren’t available conventionally. It takes a non-conforming loan to get it done.
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8 Interesting Jumbo Mortgage Loans
Jumbo mortgages are a type of a portfolio loan. Lenders don’t sell them to Wall Street; they keep them on their books where they generate interest income for the lender’s bottom-line.
Because jumbo loans are held in portfolio, a lender’s jumbo mortgage guidelines can be whatever that lender wants. The government mandates of an FHA, VA, or USDA loan don’t apply.
Portfolio loans are often flexible and lenient, and cater to the needs of niche group of borrowers.
Here are 8 portfolio loans available today.
1. The Doctor Loan
The Doctor Loan mortgage program is no down payment mortgage loan designed for the doctor community. Borrowers using the program can put down money on a home, but they’re not required to.
Doctors with an MD, DO, DDS, or DMD degree are eligible for the Doctor Loan, including:
- Medical doctors
Practicing doctors and residents can use the Doctor Loan, along with all doctors with a signed offer letter of employment. Borrowers don’t require mortgage insurance.
Doctor loans let home buyers do 100% mortgage loans for purchase prices up to $750,000; and, to borrow up to $2 million for the purchase of a home with just ten percent down.
Down payments don’t have to come from a borrower’s funds with the Doctor Loan program. Cash gifts for down payment are allowed.
Doctor loans can be used to purchase or refinance a 1-unit home such as a house, condo, or town home; or a 2-unit home in which the borrower will live.
2. The Doctor Loan For Doctors Who Own Rental Homes
The Doctor Loan For Real Estate Investors is a low-down payment mortgage designed for doctors who own multiple homes.
The program is available to doctors of all types, including medical residents and doctors with an MD, DDS, DMD, OD, DO, or DPM designation.
The program lets doctors borrow up to $850,000 for the purchase of a single-family, primary residence with special consideration shown to deferred student loan payments.
Borrowers may own an unlimited number of investment properties and, while jumbo loan sizes are allowed, investors can borrow as little as $50,000, if necessary.
3. 100% Jumbo Mortgage With No Mortgage Insurance
The 100% Jumbo Mortgage With No Mortgage Insurance (MI) program is a niche loan for home buyers with good credit scores and at least two months worth of mortgage payments in savings.
The program allows buyers to borrow 100% of a home’s purchase price, up to $650,000, for the purchase of a single-family primary residence.
An additional five percent can be borrowed in the form of a second mortgage for making home improvements, completing energy efficiency projects, or for buying furniture, raising the program’s combined borrowed amount to 105%.
Borrowers must have a 12-month history of on-time mortgage or rental payments.
4. Jumbo Mortgages For Low Credit Scores
Mortgage borrowers can get jumbo loans of up to $2 million with below-average credit scores, a history of missed payments, and a recent bankruptcy, short sale, or foreclosure.
Programs are available for single-family homes, condos, town homes; 2-, 3-, and 4-unit properties; and, for all types of occupancy.
Lenders like to serve borrowers who credit scores are low because the niche is underserved.
Buyers with below-average credit scores can finance up to $2 million with a 10 percent down payment, and no mortgage insurance is required.
Refinancing households can borrow up to 90% LTV, also with no mortgage insurance.
To get approved for a non-conforming loan with lower credit scores, a borrower should have at least 9 months worth of mortgage payments saved in reserve; or, for a vacation home or rental property, at least eighteen months in reserve.
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5. High-Acreage Jumbo Loans
High-acreage jumbo loans are niche loans for people buying or refinancing homes on up to 40 acres of land. Conforming loans limit mortgage borrowers to 10 acres total.
Jumbo loans of this type are not agricultural mortgages or rural loans. Agricultural mortgages are loans for the purchase of farmland, or to finance the cost of operating a farm,; and, rural loans are another name for USDA loans.
High-acreage mortgages are niche residential home loans that let home buyers borrow up to 90% of a home’s value with no mortgage insurance required; and, putting nearly no restrictions on property or occupancy type.
Borrowers can use high-acreage loans for a primary residence, a vacation home, or an investment property; and for a home with one, two, three, or four units. Loan sizes range up to $2 million and co-signing with a person who lives elsewhere such as a parent or child, is often allowed.
6. Super Jumbo Loans To $3 Million
Super jumbo mortgages are a group of non-conforming loans which allow up to $3 million for single-family homes, condos, town homes, and 2-4 unit properties, with exceptions available up to $20 million.
Super jumbo mortgage lenders typically allow down payments that are less than 20%; and, they rarely require homeowners to pay private mortgage insurance.
Super jumbo mortgage loans can also be used for cash-out refinances with little restriction on how much cash a homeowner can get at closing.
In general, borrowers using super jumbo loans should expect to show a 6-month history of on-time mortgage or rental payments; and, at least 6 months of reserves in savings.
Super jumbo loan rates can be lower than rates on “regular” jumbo loans depending on a borrower’s credit score, loan size, and net worth. And, rate can vary wildly between lenders so talk to two or more before committing to a rate.
Got a jumbo loan question?
7. Cash-Out Jumbo Mortgages
Cash-out jumbo mortgages are niche loan products for homeowners who want to their convert home equity into cash using a cash-out refinance.
Homeowners can cash out up to $750,000 with a jumbo cash-out refinance of a primary home or vacation home; and one quarter-million dollars in the refinance of an investment property.
Jumbo cash-out refinances can be used for debt consolidation, to purchase additional properties, or for access to investment capital. It’s also popular among homeowners who bought homes with cash and who are looking to do delayed financing.
Cash from a jumbo cash-out refinance can be used for any purpose whatsoever, with no caveats or restrictions.
8. Jumbo Loans For Non-Warrantable And New Condo Buildings
Home buyers can use non-conforming loans to buy or refinance condos in brand-new condo buildings.
Condominium units in newly-built buildings are known as non-warrantable condos.
In addition, condos in buildings with large, street-level retail presence; and, condos in buildings in which one person owns more than ten percent of the units are considered non-warrantable.
Non-warrantable condos represent more risk to lenders than established condos and buildings.
Using Non-Warrantable Condo loans, home buyers can finance up to 90% of a condo’s purchase price with no mortgage insurance required.
Jumbo Mortgage Rates Today
Jumbo mortgage rates aren’t made in the same way that mortgage rates for government-backed loans are made.
Mortgage rates for government-backed loans are made on Wall Street. The rates you see highlighted in Freddie Mac’s weekly Primary Mortgage Market Survey; and published for FHA mortgages, VA mortgages, and USDA loans, are based on the price of mortgage-backed securities, which are bonds that are bought and sold like stocks.
Stock prices change all day and so do bond prices, which is why government-backed mortgage rates sometimes change 5 or more times in a 24-hour period.
By comparison, jumbo mortgage rates might not change even weekly. This is because their rates are set by the lender that’s making the loan.
Jumbo loans are portfolio loans, which means that lenders make them to hold in a portfolio of investments. There’s no government-mandated interest rate on a portfolio loan, and no rules for what a lender might do.
Portfolio loans are “common sense”-type loans. Their mortgage rates reflect that. The rate on your jumbo mortgage is unique to you, your home, and the risk you represent to the lender.
This also means you’ll probably get different rates from different lenders so, if your first mortgage lender can’t help you or you don’t like the rate, try again with someone else.
The hardest part of getting a jumbo mortgage approval can be finding a lender with the program that you need.
Common Jumbo Mortgages Questions
Jumbo mortgage loans are known by multiple names including non-conforming loans, portfolio loans, and bank loans.
They account for just 4% of all new mortgages made, and they’re extremely important to the home buyers and refinancing households that need them.
Non-conforming loans fulfill the mortgage needs of communities not covered by the government’s five mortgage agencies — Fannie Mae, Freddie Mac, the FHA, the VA, and the USDA.
They’re niche loans for niche communities.
Here are answers to some of the most common questions asked about jumbo home loans.
What’s the difference between a jumbo and non-jumbo mortgage?
The main difference between a jumbo mortgage and a non-jumbo mortgage is loan size. Jumbo mortgages exceed the local conforming mortgage loan limits for an area.
What’s the difference between a conforming mortgage and a non-conforming mortgage?
The difference between a conforming mortgage and a non-conforming mortgage is that conforming mortgages are backed by government groups Fannie Mae or Freddie Mac and literally conform to the mortgage guidelines set forth by the agencies.
Non-conforming mortgages do not conform to government guidelines, which place a loan size limit on all backed loans.
Jumbo mortgages are non-conforming loans by definition. Their loan sizes are too big to conform to Fannie Mae and Freddie Mac guidelines.
What’s a portfolio loan?
A portfolio loan is a loan that a lender keeps in its portfolio of investments.
Because portfolio loans are kept “on the books,” mortgage lenders can use them to serve niches in a market, including 100% loans for doctors, cash out refinances for people who paid cash for a home, and loans for non-warrantable condominiums.
What is a mortgage loan limit?
A mortgage loan limit is the maximum loan size that a given government agency will back on a mortgage. Loan limits vary by U.S. county, and by mortgage-backing agency.
Loans that exceed mortgage loan limits are typically called jumbo loans.
What’s the best place to get a jumbo mortgage?
Jumbo loans are custom-made so every lender does them differently. This is a change from conforming loans and FHA loans, which are backed by Fannie Mae and Freddie Mac, and the FHA, respectively; and, are securitized and commoditized via Wall Street.
The best place to get a jumbo loan is with a lender that can serve your particular need.
Are jumbo loans harder to get approved than conforming loans?
Getting approved for a Jumbo loan isn’t harder than getting approved for a non-jumbo loan like a conforming loan or an FHA loan — it’s just different.
Jumbo loans require different sets of verifications as compared to government-backed loans. Sometimes, more disclosures are required. And, sometimes, fewer disclosures are required.
Each lender makes it own rules so be sure to shop around.
When I pay down my jumbo loan below the conforming loan limit, does it become a conforming loan?
Jumbo loans do not automatically turn into conforming loans when their remaining loan balance falls below local mortgage limits. Once a jumbo, always a jumbo.
What credit score do I need for a jumbo mortgage?
Lenders make their own rules for what’s allowed with a jumbo loan so there’s no minimum credit score, per se.
That said, borrowers with higher credit scores can be approved for a wider range of loans from a wider range of lenders, but having a lower credit score doesn’t preclude you from getting approved.
Lenders consider factors other than your credit score in an approval for a jumbo loan including your home’s value, your loan size, income, and the amount of money you have in reserves.
How long does it take to approve a jumbo loan?
Jumbo loans take the same number of days to approve as a conforming, FHA, VA, or USDA loan, with the notable exception of the FHA Streamline Refinance and other streamlined programs that ask for little or no verification.
Most mortgage lenders can close a jumbo loan in 3 weeks or fewer.
How much down payment do jumbo loans require?
There are no specific down payment requirements with jumbo mortgages because lenders each make their own rules. Borrowers can make very large down payments if they want, or they can make no down payment at all.
Down payment requirements depend on the lender which is why it’s a good idea to talk to two or more lenders when you’re shopping for a jumbo-sized mortgage.
Can I get a jumbo mortgage if I’m self-employed for less than two years?
Yes, you can get a jumbo mortgage if you’re self-employed for less than two years. There is no specific self-employment requirement with non-conforming loans because lenders make their own rules for what they will and will not approve.
Can I refinance a jumbo mortgage?
Yes, homeowners with jumbo mortgages can refinance just like every other homeowner can. The rules of the jumbo refi depend on the lender and its rules and those rules are different from lender-to-lender.
If your jumbo refinance mortgage is turned down by your preferred mortgage lender, apply somewhere else and you may find a different outcome.
This is especially true with the cash-out jumbo loan. Some lender restrict the amount of cash out a homeowner can take via a refinance. Others put no restrictions at all.
Do I need mortgage insurance with a jumbo mortgage?
You do not always need mortgage insurance for jumbo loans over 80% LTV. Some mortgage lenders don’t require it. Rules vary between mortgage lenders so be sure to talk with two or more before lock your rate.
What are the jumbo mortgage closing costs?
Jumbo mortgage closing costs vary by mortgage lender and mortgage — the same way that costs vary among conforming, FHA, VA, or USDA loans.
One notable difference between non-conforming and conforming loans, though, is that some mortgage lenders will require two home appraisals as part of their jumbo mortgage approval. Extra appraisals can add several hundred dollars to your closing costs.
Can I use jumbo loans to buy a vacation home?
Yes, you can use jumbo loans to buy a vacation home. Loans are available for high-acreage properties, 100% financing is available, and lenders lend up to $3 million.
Can I use jumbo loans to buy a rental property?
Yes, you can use jumbo loans to buy a vacation home. Loans are available for high-acreage properties, and lenders lend up to $1 million.
Can I use jumbo loans for a multi-unit home?
Yes, you can use jumbo loans to buy multi-unit homes, including 2-unit homes, 3-unit homes, and 4-unit homes. Lenders lend up to $2 million.
How much money do I need in the bank to use a jumbo loan?
Jumbo mortgage lenders don’t enforce specific “money-in-the-bank” requirements on their buyers.
And, while it’s good to have at money in reserves for financial planning purposes; and, to have a proper home insurance, flood insurance, and personal liability insurance in place, you can get a jumbo mortgage approval with little cash available for emergencies.
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