If you live in one of our nation’s pricier areas or want to buy a home significantly above the median price for your area, you’ll probably need a jumbo loan. If you’re not familiar with these types of mortgages, here are some of the frequently asked questions and the answers to help you understand them better.
What is a Jumbo Loan?
A jumbo loan is a type of mortgage that exceeds the loan limits set by the Federal Housing Finance Agency (FHFA). For 2022, this limit is $647,200, but it is higher in expensive areas like Alaska, Hawaii, and cities such as New York and California. Jumbo loans are used when purchasing homes that exceed these limits.
What is the Maximum Jumbo Loan Amount?
The maximum loan amount for a jumbo loan can vary by lender, but typically ranges from $2 million to $3 million for a primary residence.
How Much Down Payment is Required?
Your down payment will depend on your credit score. If you have a credit score above 720, you may qualify for a down payment as low as 3.5%. For lower credit scores, expect to make a down payment between 5% and 10%.
Are Jumbo Loan Rates Higher?
Jumbo loans can sometimes come with higher rates due to the increased risk for lenders. However, in recent years, jumbo loan rates have become highly competitive and, in some cases, even lower than conventional loans.
Do Jumbo Loans Offer Fixed or Adjustable Rates?
Both fixed-rate and adjustable-rate mortgage (ARM) options are available for jumbo loans. ARMs may offer lower rates for the initial period if you plan to sell in a few years, while fixed-rate loans offer predictable payments for the long term.
Are There Prepayment Penalties?
Typically, there are no prepayment penalties with jumbo loans, but it’s important to verify with your lender.
Does the VA Offer Jumbo Loans?
Yes, the VA provides jumbo loans, with limits up to $2 million, depending on the lender’s specific requirements for credit and down payment.
Can I Use a Jumbo Loan to Buy a Condo?
Yes, you can use a jumbo loan to purchase most condos, especially in high-cost areas.
How Long Does It Take to Get a Jumbo Loan?
Getting pre-approved for a jumbo loan can be quick, often as simple as a phone call. The closing process typically takes 25-30 days, similar to conventional loans.
What Are the Closing Costs for a Jumbo Loan?
Closing costs for jumbo loans are generally between 2% and 5% of the purchase price. For a home priced at $800,000, expect closing costs to range from $16,000 to $40,000.
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Ready to learn more about jumbo loans or get started on your home purchase or refinance? Contact us today for expert guidance and personalized loan options.
Note: These materials are not from HUD or FHA and were not approved by HUD or a government agency.
