Jumbo mortgage

A jumbo mortgage loan is a mortgage loan that exceeds a conventional mortgage loan in size. Exactly what constitutes a jumbo mortgage loan will therefore vary from one market to another. The term jumbo mortgage loan is chiefly used in the USA.

Why is it more difficult to get a jumbo mortgage loan?

With all other things equal, lending a large amount of money to one borrower is considered more risky for the lender than lending several smaller amounts of money to several different borrowers. Therefore, lenders tend to be more carefully and require a larger investigation of the applicants financial situation before they approve a jumbo mortgage loan.

Even if you have high-valued real estate to offer as collateral for the jumbo mortgage loan, the lender can be hesitant to approve your application simply because the market for high-priced properties tend to be smaller. There are simply much fewer buyers available for pricey real estate, so a house can be left sitting for sale for a long time.

It can also be difficult for the original lender to find investors willing to purchase a jumbo mortgage loan, thus making it more difficult to spread risk. This is especially true for mortgage loans exceeding $1 million. A mortgage loan application for more than $2 millions will often require backing from private investors before the lending company approves it.

How to increase your chances of getting a jumbo mortgage loan

• Have excellent creditworthiness
• Show that you aren’t just capable of buying expensive real estate but also have the financial muscles to maintain it properly, thus retaining (or increasing) its value over time.
• Have down-payment ready that is larger (in percentage) than the standard for non-jumbo mortgage loans.
• Be willing to pay for at least two appraisals.Since jumbo loans are considered extra risky for the lender, having at least two independent appraisals of the value can be helpful. The appraisers may also be able to give the prospective lender and idea about how long it would normally take to sell a property like this in this area.
• Be willing to accept a higher interest rate(Although, in parts of the United States, the nominal interest rate for jumbo loans is actually lower than for standard size loans.)
• Be willing to split the loanIn some situations, you can actually split the jumbo mortgage loan into two. One bottom loan with a fairly low interest rate, and one top loan with a higher interest rate. In a sense, you will get a standard size mortgage loan with a standard level interest rate + a second mortgage loan with a higher interest rate.
• Have a co-borrower with excellent creditworthiness

Refinancing a jumbo mortgage loan

Refinancing a jumbo loan tend to be more costly than refinancing a standard size loan, because the fees paid for refinancing tend to be based on the size of the principal. Of course, you may be capable of negotiating this down if you are a desirable client.

Jumbo & Super Jumbo in the United States

Jumbo

At the time of writing, single-family home mortgage loans above approximately 470,000 USD tend to be regarded as jumbo mortgage loans in continental USA.

In Hawaii, Alaska, Guam and the U.S. Virgin Islands, real estate prices are higher and anything below $625,000 is usually regarded as a standard size mortgage loan.

Super Jumbo

In the continental U.S., single-family mortgage loans above $650,000 are sometimes referred to as Super Jumbo mortgage loans since they are bigger than the average jumbo loan. Of course, in some neighborhoods, this would still be a normal size (or even small) mortgage loan.