Jumbo Mortgage Loan Limits Higher in 2023 – New Options Available

Jumbo Mortgage Loans are home loans with loan amounts exceeding conforming (Fannie Mae/Freddie Mac) loan limits.

New in 2023, jumbo loans (not in ” high-cost ” areas) are mortgage loans greater than $726,200 for a single-unit residence.

Jumbo Loan Amounts in 2023 for Texas, Florida, and Colorado

• Texas – Jumbo loans are mortgage loans >$726,200.
• Florida – Jumbo loans are mortgage loans >$726,200 except in Monroe County (Key West), where the loan amount is >$874,000
• Colorado, Jumbo loans are mortgage loans >$726,200 – $1,075.250 (depending on the county). Eagle County (Vail) starts at >$1,075,250

What is a Jumbo Loan?

Fannie Mae and Freddie Mac are Government Sponsored Enterprises that provide mortgage liquidity by securitizing mortgage loans. Fannie Mae and Freddie Mac securitized loans are known as “conforming loans.”

Jumbo Mortgage Loans (non-Agency) are “non-conforming” loans because they don’t conform with Agency (Fannie/Freddie) Guidelines ).

Investment banks, credit lines (to banks and mortgage lenders), hedge funds, “investors,” commercial banks, and other funding sources provide funding for Jumbo Loans.

Often these are held as “portfolio” loans (loans held in a loan portfolio by the financial entity). They’re also often securitized via private or public securitization.

Not all Jumbo Loans are the Same

Jumbo loans aren’t rigid government-sponsored or insured loans. Underwriting guidelines, rates, pricing, and availability can vary significantly by the different jumbo loan providers (and their investors).

Rates and Down Payment for a Jumbo Loan

Jumbo Mortgage Loan guidelines and pricing can vary, there are a few common characteristics of Jumbo Loans:

1. Most require a 20% down payment (some as little as 10%), but if a borrower can handle a 25% or larger down payment, better rates and terms might be available from the lender.
2. Jumbo loans can be either Fixed-Rate or Adjustable Rate loans. Adjustable rate loans are often known as “ARM” loans. These can have varied fixed rate terms ranging from monthly to up to 10yrs fixed. The most common are 5 years or 7years or 10 years of fixed rate interest.
3. Jumbo loans can be “amortized” or “interest-only.”An amortized loan includes both principal and interest in the monthly payment. An interest-only loan payment has only interest due on the unpaid principal balance.
4. Jumbo loans can be available for either Employed or Self-Employed Borrowers.
5. Jumbo loans may be available for borrowers with significant assets, even if they can’t demonstrate sufficient income to qualify.
6. Jumbo loans might be available to business owners who merge business and personal income using tax returns as proof of income for home loan qualifying.

Because these are “portfolio” loans, Jumbo loans may also be available to foreign nationals. Check with your mortgage professional to learn about available jumbo home loan options.

How to Get a Jumbo Mortgage Loan

Jumbo mortgage loans usually require very good (or better) credit scores. Assume a 680 middle FICO score as a minimum for these (with exceptions available for very qualified borrowers due to the portfolio nature of Jumbo Loan products). Generally, a 720+ middle FICO with at least 6mos of reserve liquid assets and a 25-30% down payment will often see the best loan pricing of a Jumbo Loan.

Jumbo Mortgage Loans for Short-Term Rentals

Jumbo loans are also available for 2nd homes and Vacation Homes (even if offering the home as a short-term rental for limited times during the year, generally less than 180 days/year. Verify this with your lender).

Jumbo Loans for Vacation Homes and 2nd Homes

If buying a vacation home or 2nd home for your personal use but planning to also offer it as a short-term rental (Airbnb/VRBO), make sure to disclose this during the loan process to your lender (in writing is best so that you can prove you disclosed it…an “intended use” type of letter). Doing this indicates that you communicated your intended use to your Lender.

Jumbo Loans for Short-Term Rentals (Airbnb and VRBO)

Jumbo loans aren’t often available for Investment homes. When they’re available, they’ll usually have a higher interest rate than 2nd homes or vacation homes. Because of this, you’ll want to avoid any possible misrepresentation of use when applying for a Jumbo loan (or any mortgage). Disclosing by writing and submitting a letter to your lender during the loan application process is recommended. Talk with your legal advisor for more information about this if needed.

Mortgage Insurance (MI) and Jumbo Mortgage Loans

Mortgage insurance (MI) isn’t required for non-conforming jumbo loans, even when the down payment is less than 20% of the purchase price.

Jumbo Mortgage Loan Features

• Jumbo Loans might have fixed rates or adjustable rates (ARMs).
• Jumbo Loans could be interest-only or amortizing.
• Jumbo Loans don’t require mortgage insurance (MI).
• Jumbo Loans may be available for self-employed borrowers and business owners
• Jumbo Loans may be available to foreign nationals without US income
• Jumbo Loans sometimes have lower rates than non-jumbo mortgage loans.

Contact Steve Silver at Silver Mortgage, at 1-800-920-5720.

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