if that mortgage goes into default. With jumbo loans, the bank is taking on a much higher risk than with a conforming loan. How much money are we talking about when we discuss jumbo loans? On November 28, 2017, the FHFA announced that the new threshold for a jumbo loan in most areas of the U.S. would be $424,100. However, in certain high-cost-of-living areas, that number can go as high as $636,150. In other words, only very expensive homes are going to earn a jumbo loan. It used to be that getting a jumbo loan would mean a higher interest rate for the borrower. However, following the Great Recession, interest rates are now on-par with conforming loans — sometimes even lower. This means that buyers who can afford jumbo loans are usually paying the same interest rate as those who are buying lower-priced homes. However, it is usually not easy to obtain a jumbo mortgage. The underwriting requirements are extensive, and there is a lot more scrutiny placed onto the borrower by the bank. Requirements for a jumbo loan vary according to the lender, but one of the most common requirements is that the borrower must supply a larger down payment. Often that payment requirement is 20%, which in the case of a $425,000 mortgage would be $85,000 cash. For many Americans, saving that much money up in the bank would be extremely difficult. Additionally, the borrower must have more money in reserves and usually there are higher credit score requirements . If your buyer is going to be going with a jumbo loan, you must know what the requirements are and make sure that they can fulfill the requirements of that lender and that loan program.
USDA Loan Program
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