If you need a home loan that exceeds conforming loan limits a jumbo loan can save the day. In this post, we’ll review what a jumbo loan is and how it can help you buy your dream home. We’ll also give you an overview of what conforming loans are to explain how they differ from non-conforming jumbo loans.
A conforming loan is a home loan that conforms to Fannie Mae and Freddie Mac guidelines. Fannie Mae and Freddie Mac are two government agencies that buy loans from banks as long as they meet conditions such as not exceeding a certain loan amount. Conforming loan limits fluctuate from county to county. In most of the U.S., the conforming loan limit is $424,100 for a one-unit home.
You can find the loan limits for each number of units in the table below:
Parts of the U.S. with the highest home values are called “high-cost” locations and have a higher conforming loan limit. Some high-cost areas in the Mid-Atlantic region include D.C., Northern Virginia, and a good portion of Maryland.
Here are the conforming loan limits for high-cost locations by number of units:
To review conforming loan limits for the specific location where you plan to buy, check out the Federal Housing Finance Agency (FHFA) website where there’s a Conforming Loan Limits Map.
You’ll notice on this map that there are locations where the one-unit loan limit sits somewhere in the middle of the $424,100 and $636,150 maximums shown in the above charts.
A jumbo loan is a non-conforming home loan because it allows you to borrow more than the loan limits set by Fannie Mae and Freddie Mac. Say you need to borrow $800,000 to buy a home in Montgomery County, Maryland. Montgomery County does happen to be a designated high-cost location yet the conforming loan limit for a single-family home is just $636,150. Your loan value of $800,000 would surpass the conforming loan limit. In this situation, we can assist you with a non-conforming jumbo loan so you can buy your dream home.
The underwriting guidelines for a jumbo loan are often more restrictive than a conforming loan since these loans are not eligible to be bought by government agencies. You should expect to have a high FICO credit score in the 700’s, a down payment of at least 20 percent, and a significant amount of cash reserves to get approved. The monthly payment for a jumbo loan is generally higher than that of a conforming loan which is another reason for the stringent underwriting guidelines. We want to make sure you have enough income and reserves to comfortably keep up with the payment.
Do you have your heart set on a home that you need a jumbo loan to buy?
Reach out to prequalify and to review your options.
+A number of other states and Puerto Rico do not have any high-cost areas in 2017.
Note that the loan limits apply based on the original loan amount, rather than the unpaid principal balance (UPB).