Jumbo mortgage loans are exactly what the title says, mortgages that are bigger than the maximum amount allowed by Fannie Mae, Freddie Mac, RD or VA.  The maximum amount for each program is called the conforming loan limit.  Currently, the conforming limit is $766,550.  If you are looking for a mortgage above that amount, you will need to obtain a jumbo mortgage or make enough of a down payment to reduce the mortgage loan amount to $766,550.  

These loans may be for 10, 15, 20, 25, or 30 years.  The down payment is at least 20% of the loan amount for a purchase transaction and 25% of the appraised value of the home for a refinance.  Mortgage insurance will not be required since the loan to value ratio will not be over 80%.

 

Benefits of a Jumbo Mortgage Include:

•  Competitive Fixed Interest Rates - The main benefit of a jumbo loan is being able to go beyond the conforming loan limits and get a competitive fixed interest rate on your mortgage loan for the term of the mortgage.  

•  Having A Single Mortgage - Rather than having a mortgage loan up to the conforming limit and a separate mortgage for the amount over that limit, a jumbo loan allows the borrower to have a single mortgage and make one monthly payment.  

 

Other considerations:

•  Enhanced Qualification Standards -  Jumbo mortgages have tighter qualification standards than conforming mortgages because there is more risk associated with the larger loan amount.  There are stricter guidelines for credit scores, income levels and debt to income requirements.  The amount of documentation to verify income, assets and other obligations may be more than what is needed for a  conforming loan.  

•  Higher Pricing - Jumbo mortgages generally have interest rates between 0.25% and 0.75% higher than other mortgage loans.  This is also due to the additional risk associated with the larger mortgage amount.

•  Restrictions on Refinances - Borrowers may obtain a jumbo mortgage to purchase or refinance a property.  For refinances, a lower loan to value ratio than is offered for purchase transactions may be required.