A jumbo loan is a conventional (not government-insured) mortgage loan that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that buy and securitize mortgage loans. Jumbo loans usually have stricter underwriting guidelines because they are not backed by Fannie Mae or Freddie Mac but are instead held or securitized by large banks or private funds. Stricter guidelines include tighter debt ratio requirements, larger down payment, and reserve requirements, and tighter credit standards.
In some states, the limit for jumbo loans can vary by county. However, for all counties in Texas, the conforming loan limit is $647,200. Any loan amount that is greater than $647,200 is considered a jumbo loan.
Any loan amounts above the Texas loan limit will be considered a jumbo mortgage.
In general, the mortgage qualification criteria are much stricter for jumbo loans simply because of the higher risk associated with the larger loan amount. Borrowers looking for homes that will require larger mortgages should have good credit, stable income, ample reserves, and a manageable level of debt.
How jumbo loans relate to home prices
Jumbo loans are mostly used by those purchasing higher-end or “luxury” properties. By design, conforming loan limits are usually set higher than the median home price within a particular county. In theory, this gives homebuyers plenty of properties to choose from without the need for a jumbo loan.
In Travis County, Texas, for example, the median home value was around $602,231 in December 2021 according to Zillow. The conforming loan limit for the county is currently $647,200. That’s well above the median value for a house in the area.
You can find more information about jumbo loan qualification requirements here.
Jumbo loan questions?
If you are thinking about refinancing, have questions on interest rates, obtaining jumbo financing, or additional questions about what loan products you may qualify for, you can reach our team here, by phone at (855) 855-4491, or by email at jvmteam@jvmlending.com.
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