What’s a Jumbo Mortgage and Why is it so Popular?

Dec 6, 2021 | Blog, Mortgage


If you need to borrow a large amount of money to buy a home, you may not fit the conventional loan guidelines. This may leave you without options for a mortgage, or at least that’s how it feels since FHA and conventional loans have specific limits.

Enter the jumbo mortgage, a helpful product for borrowers who need more than the typical loan offers. Here’s what you must know about the jumbo loan.

What is a Jumbo Mortgage?

By definition, a jumbo mortgage is any mortgage that exceeds the current conventional loan limits. In 2022, the limit is $647,200, which is $98,950 more than the 2021 limits.

If you need to borrow more than $647,200, you won’t qualify for conventional (Fannie Mae or Freddie Mac) financing. You’ll need a larger loan that falls into the jumbo loan guidelines.

How Does it Work?

Jumbo loans aren’t backed by any government entities, lenders themselves underwrite and fund the loans, making their own guidelines.

To get a jumbo loan, you must meet stricter requirements, but they aren’t impossible. Here’s what most borrowers need to qualify:

  • A high credit score (700+ is best), but any good credit with a solid credit history is good
  • 20% – 30% down payment
  • Debt ratio below 43%
  • Stable income and employment for the last 2 years
  • No recent public credit events, such as a bankruptcy or foreclosure

Since jumbo loans are riskier due to the higher loan amount, a higher credit score and down payment is necessary to make up for the risk. The benefit, though, is you invest in your own home, giving yourself equity right away. You will also have a lower mortgage payment because you borrow less money with a higher down payment.

Jumbo Loan Attributes

You won’t notice much difference in the terms for jumbo loans as you would a standard loan. Here’s what to expect:

  • 15 – 30-year terms
  • Fixed interest rates
  • Slightly higher APRs to make up for the risk
  • No mortgage insurance

Why More Borrowers Need a Jumbo Mortgage Today

Jumbo loans have increased in popularity because of the housing market. With prices continually increasing with higher demand, borrowers need more money to successfully buy a home.

Jumbo loans used to be popular only in high-cost areas, but today, borrowers need them all over the country in areas that previously met the standard loan limits. Fortunately, jumbo loans are more accessible today for many borrowers.

Final Thoughts

If you need more money than the standard loan limits, a jumbo loan is within reach. Equity Prime Core is here to help you find the perfect loan that fits your budget and helps you buy your dream home.

Don’t get overwhelmed at the thought of how much you are borrowing. We’ll help you look at the big picture, focus on the monthly costs, and understand the total cost of the loan over its lifetime to help you choose the right loan for you.