A jumbo mortgage is a home loan that exceeds the typical lending limits of the Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae), the Federal Housing Administration (FHA) or the Veterans Administration.
Loans sold to Fannie Mae or Freddie Mac are referred to as conventional loans or conforming loans since the mortgage amount "conforms" to these firms' underwriting standards and lending limits.
Each year, Congress establishes jumbo loan limits.
Most counties in the United States have standard lending limits.
There are a few counties that are exempt.
Jumbo loans are those that exceed the following lending limitations.
- 1-unit homes: $548,250
- 2-unit homes: $702,000
- 3-unit homes: $848,500
- 4-unit homes: $1,054,500
2021 Conforming Jumbo Loan Limits
Fannie Mae and Freddie Mac loan exceptions are known as “conforming jumbo” loans, because they meet the underwriting guidelines for high-cost US counties even though they exceed the customary loan limits.
Jumbo mortgages have a higher interest rate than loan amounts below the jumbo limit. For some borrowers, the way to reduce the loan amount below the jumbo limit is to take on a second mortgage with the first mortgage. The second mortgage is the difference between the first mortgage and the jumbo limit. For example:
The second mortgage rate is usually higher than the first mortgage, but the combined payment can come in lower than a single mortgage payment at the jumbo interest rate, depending on the interest rates, second mortgage terms, and loan amounts
2021 FHA jumbo loan limits
The FHA also has a lending limit for most US counties. The FHA jumbo loan limits are generally less than the typical conventional loan limits.
But, as with conventional loans, there are exceptions to the 2021 FHA lending limit. Loans that exceed these limits are called jumbo FHA loans. The FHA jumbo loan down payment is 3.5%.
Low Cost Areas
Areas Between Floor and Ceiling
High Cost Areas
Areas at Ceiling
The United States Department of Agriculture (USDA Home Loan)
Believe it or not, there is no maximum loan amount for a USDA home loan and the USDA home loan does not require a down payment, however, there are income limits; and that’s the reason why this home loan does not have a maximum loan amount (USDA jumbo loan).
USDA income limits vary from state to state and county to county.
2021 USDA loan income limits are $86,850 for 1 – 4 household members
For households of 5 or more the limit is $114,650.
Jumbo VA loan limits for 2021
The Veteran’s Administration does not limit the amount of money you can borrow from the bank. However, the VA does limit the amount of VA insurance liability, which in turn, usually affects the amount of money the bank will lend you. The size of the VA loan varies by US county. VA loans exceeding the customary lending limits are called VA jumbo loans.
Frequently Asked Questions About Jumbo Loans
Are jumbo loan rates higher?
Yes. Because of the size of the loan and the potential loss with a default, lenders usually require a higher interest rate due to the risk.
Can I get a 10 down mortgage on a jumbo loan?
With the mortgage crash in the rear view mirror, lenders are offering jumbo mortgages with as little as 10% down payment. Some lenders are even willing to eliminate PMI on these loans.
How can I avoid a jumbo loan amount and interest rate?
A. The interest rates on jumbo loans are usually higher than mortgages that are under the jumbo limit. A common tactic to get under the jumbo limit is to take on a second mortgage.
For example, if the current conventional loan limit is $548,250 and you need to borrow $600,000. You could borrow $600,000 and pay the jumbo interest rate, or you could structure the first mortgage at $548,250 and a second mortgage for the balance of $51,750.
How much can you borrow on a jumbo loan?
The amount you can borrow depends on your income and monthly debt. Lenders use a borrowing formula to determine the maximum loan amount, called debt to income.
Is a jumbo loan a conventional loan?
A jumbo loan can be a conventional loan if the loan meets the underwriting requirements of either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation.
Is there a jumbo VA loan?
Yes. There is no lending limit with VA loans, however, there is a guaranty limit. The US government "guarantees" VA home loans up to a set amount that is authorized each year by Congress.
This means that any loan beyond the guaranty limit requires a down payment from the veteran and the loan is known as a jumbo VA loan because it exceeds the current guaranty limit.
Is there PMI on a jumbo loan?
Conventional jumbo loans require private mortgage insurance (PMI) if the down payment is less than 20%. There is no "monthly" PMI or MIP on VA jumbo loans, and there is monthly and upfront mortgage insurance on FHA jumbo loans.
What is a jumbo FHA mortgage?
The FHA mortgage limit is established by Congress each year. The current loan limit (for most US counties) is $356,362 for a single-family home or condominium. Congress allows higher FHA loan limits in some, high-cost US counties. Loans that exceed the customary loan limit are called jumbo FHA mortgages.