Best Jumbo Loan Lenders of 2023

What is a Jumbo Mortgage Loan?

A jumbo loan is a type of mortgage that exceeds the maximum conforming loan limits set by the Federal Housing Finance Agency (FHFA). Unlike conforming loans, jumbo loans aren't eligible for purchase by Fannie Mae or Freddie Mac, meaning that the lender bears the risk of default. Jumbo loans are typically used to finance high-value properties or homes in expensive real estate markets.

The conforming loan limit varies by location and the number of housing units in the property. In 2023, the conforming loan limit for a single-family home in most of the United States is $726,200. However, high-priced housing markets in places like New York and California and other states have a higher maximum loan limit of up to $1,089,300. This also includes areas like Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

How do you qualify for a jumbo loan?

Partly because of their high balances, jumbo loans have more rigorous requirements. Unlike conventional mortgages, there is no standardized underwriting process for jumbo loans. This means qualification criteria vary among lenders. While there is no set eligibility matrix, here are some general requirements that prospective homeowners should expect:

• A typical down payment of at least 20% (may be lower depending on the lender’s requirements)

• A maximum debt-to-income ratio (DTI) of 45% (some lenders allow up to 50% if other conditions are met)

• A minimum credit score of 700. Some lenders may accept scores as low as 640, but you’ll likely pay higher interest rates.

• Cash reserves of six to twelve months. Lenders want proof that you have enough funds to cover monthly payments for at least 6 to 12 months.

How to Choose the Best Jumbo Loan Lender

Jumbo loan programs and loan qualifications vary widely between mortgage lenders. Therefore, it’s imperative to do due diligence to ensure you get the best loan rate and lowest closing costs. Here are some key factors to consider when choosing the best jumbo loan lender:

Eligibility requirements

In contrast to government-backed loans, like FHA loans, VA loans, and USDA loans, jumbo loans have stricter eligibility requirements. They typically require a higher credit score, a larger down payment, and a low debt-to-income ratio. Check if you can meet the lender’s qualification criteria, for easy approval.

Interest rates and fees

Depending on market conditions, , jumbo loans may have higher interest rates and fees than conforming mortgages, which translates to higher mortgage payments. To get the best deal, shop around, compare rates and fees from different lenders, and choose one that offers competitive interest rates and reasonable fees.

Reputation and experience

The best mortgage lenders often have a strong online presence that allows you to research their reputation and track record. Online reviews and ratings from sites such as the Better Business Bureau can provide valuable insights into the lender's strengths and weaknesses. The Nationwide Mortgage Licensing System (NMLS) can also provide information on a lender's reputation. Using their NMLS number, you can look up their business history and any legal or regulatory actions taken against them. The Consumer Financial Protection Bureau also offers a lookup tool for consumer complaints.

Customer service

Jumbo loans can be complex, especially if you’re a first-time homebuyer. To navigate the process, you would want to work with loan officers who are responsive, helpful, and available to guide you through every step of the way - from pre-approval to loan closing. A company or loan officer with plenty of experience in lending jumbo mortgages can make the process easier.

What are the Benefits of a Jumbo Home Loan?

Higher loan limits

The obvious advantage of taking a jumbo loan is that you can finance a highly-priced property. Because lenders set their own jumbo loan limits, they can customize your loan amount to suit your personal finance needs. If you’re a high net-worth client and have other assets or loan needs, a jumbo mortgage loan might be a place to begin a banking relationship, which may allow you to get a lower loan rate or more flexible terms.

Flexibility

Jumbo loans can be structured in various ways to fit individual preferences. For instance, borrowers can choose between fixed-rate and adjustable-rate mortgages, depending on their financial goals and prevailing market conditions. In addition, jumbo loans come with a variety of repayment terms, ranging from 10 to 30 years, providing borrowers with the flexibility to choose a term that aligns with their budget. Likewise, some jumbo mortgage products allow homebuyers to make interest-only payments for a certain period of time.

Competitive interest rates

Although interest rates on jumbo loans may be higher than those for conforming mortgages, they are often still competitive compared to other loan options, especially for borrowers with strong credit histories and financial profiles.

Available for multiple property types

Jumbo loans can be used to finance a wide range of property types, including primary residences, second homes, and investment properties.

What are the downsides of taking a jumbo mortgage loan?

Besides the stringent loan requirements and higher interest rates associated with jumbo loans, there are other potential downsides to consider.

Limited lender options

Because jumbo loans are not standardized like conventional mortgages, there may be fewer lenders who offer jumbo loans, making it harder for borrowers to shop around for the best rates and terms. Jumbo lenders may specialize in one kind of product or another, and may not offer fixed-rate mortgage choices, for example.

Higher closing costs

Jumbo loans may come with higher closing costs, such as appraisal fees, underwriting fees, and origination fees, which can add up to a significant expense.

In addition to having your COE, there are other requirements that need to be met in order to qualify for a VA loan.

Overall, while jumbo loans can be a viable option for borrowers looking to finance high-value properties, it's important to consider all potential drawbacks and consult with a financial advisor or mortgage professional to determine if a jumbo loan is the right choice for your financial situation.