Mortgage Threshold Rises for ‘Jumbo Loans’

BY STEVE DINNEN

Good news, homebuyers: You can now buy a bigger house and still avoid a jumbo loan. It’s not that a jumbo loan is a huge burden, but qualifying for it may take some extra jumping through hoops.

For 2020, the Federal Housing Finance Agency raised the maximum conforming loan limit on a single-family property to $510,400 (previously capped at $484,350). Mortgages for less than that are conforming loans, meaning they follow guidelines set out by government agencies Fannie Mae or Freddie Mac.

Anything above that $510,400 mark is a jumbo loan. It will carry a different interest rate than a conventional loan, as well as different qualifiers.

Here’s how one Des Moines area mortgage banker explained a jumbo:

The typical minimum credit score is 700 (higher than for a conventional loan). Typical reserve requirements are six months of the monthly principal-interest-taxes-insurance payment. That’s not required with standard loans.

The rate on the fixed rate jumbo product will be (today’s pricing) 0.375% higher. Jumbo adjustable rate mortgage (ARM) loans will have a lower rate than their fixed-rate counterparts.

For any jumbo loan that is more than $750,000, the borrower should keep in mind if their lender needs title insurance to protect the loan; they have to provide a survey of the property or a real property inspection report, which can increase closing costs on a purchase or a refinancing.

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