Jumbo Loans
What is a jumbo mortgage?
When talking about jumbo loans, we’re talking about fairly large loan amounts. Sometimes you need these to afford a bigger home, while higher prices in certain areas of the country can also push you into the jumbo bracket. If you’re looking at jumbo loans, here’s what you need to know.
What Is a Jumbo Loan?
A jumbo loan is a loan that’s over the conforming loan limit set by government-sponsored mortgage groups, which are Freddie Mac and Fannie Mae. The conforming loan limit for most of Missouri is $484,350. If you can make enough of a down payment to bring your loan amount down to $484,350 and avoid jumbo financing – it is almost always a good idea to do so. Otherwise – please read on.
What is a Conforming Loan Limit?
Freddie Mac and Fannie Mae set the cap of how high any individual mortgage can be. As mentioned above, in 2019, the conforming loan limit for these investors to buy mortgages has been set at $484,350 in the lower 48 states, including St. Louis, MO; if you live in Alaska or Hawaii, the limit is $726,525.
The above limits apply to one-unit properties. You can buy up to four units in a multi-family property and the limits get progressively higher as more units are added.
If your mortgage amount is higher than conforming loan limits, then it becomes a jumbo loan. VA loans also follow the loan limits set by Fannie Mae and Freddie Mac. If you live in select high-cost counties, your loan limit on a one-unit property is anywhere between $484,350 and $726,525. However, for both St. Louis city and county this limit is $484,350.
Jumbo loans are more useful in areas where property values tend to be on the higher end, like New York City and many areas of California. Having a jumbo loan in these areas may make the difference in getting the space you need. They are not as relevant in Missouri, but there may certainly be a need for them from time to time, depending on where your home is located.
The Requirements for Jumbo Loans
Jumbo loans do have more stringent requirements since lenders consider the risk associated with getting a larger loan to be higher than the corresponding risk for non-jumbo loan amounts.
One of these is a larger down payment. This is typically required because more of a risk is taken by the lender with jumbo loans. If a house with a jumbo loan goes under and there haven’t been significant payments on it, the lender is hung out to dry in order to cover the costs lost.
At Carlson Mortgage, if you’re looking to buy a property with a jumbo loan amount of up to $1 million, you need at least a 20% down payment. The percentage required for a down payment increases with higher loan amounts and if you add a second unit. The same is true if you go from a primary home to a second home or investment property. To get the lowest interest rates in MO for your home purchase, our lenders like to see a 25% down payment.
The one exception to this rule is that there is no down payment required on some VA jumbo loans. However, you can only use your VA loan to get a primary property. All the standard VA loan requirements apply. You have to be an eligible active-duty service member, veteran or surviving spouse.
The lenders also want to know that you’re well-qualified to handle the payments for a certain time period after a job loss or other significant life events affecting your income. Depending on your loan amount, whether you’re a first-time home buyer and the size of your down payment or equity amount, you’ll need anywhere between 6 and 18 months of mortgage payments, including principal, interest, property taxes, homeowners insurance and homeowners association dues (if applicable) for a standard jumbo loan in Missouri. VA loans require anywhere between two and six months of reserves. Other lenders may have different requirements.
In a nutshell, everything is jumbo about the jumbo loan: the size of the loan, the down payment and the monthly payments. This may sound alarming, but it’s normal in comparison to the size of an average loan. If you’re truly looking for that dream house and it falls into that range, don’t let the adjective “jumbo” deter you. Several loan terms are available in jumbo form and they have fixed or adjustable rates.
Relevant links:
Our loan application can be found here or you can call us at 314-329-7314 to speak with one of our loan officers. Also, here is our pre-approval page, if you are looking to buy a home.
Posted by: Carlson Mortgage – a St. Louis mortgage broker providing home loans in the state of Missouri. We are routinely ranked as a #1 mortgage broker in Missouri on Yelp, Google and Zillow. We can be reached at (314) 329-7314 seven days a week. Let us be your source for some of the lowest mortgage interest rates in St. Louis on first-time home buyer, conventional, FHA, Veterans (VA), Jumbo and condominium (condo) financing. Since 2004, we’ve been providing home loans and mortgage services in St. Louis that are tailored individually to your unique needs and to your financial situation. Our loan officers speak English, Spanish and Russian. Call us today to inquire about home loan interest rates, to get pre-approved for a purchase or a refinance mortgage, or if you have any general mortgage lending questions.