Jumbo mortgage loans are loans that are larger than the conforming loan limits set by Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are both government-sponsored enterprises (GSE) that provide stability and affordability to the mortgage market by buying loans from mortgage lenders. That allows the lenders to issue more mortgages to other borrowers.

However, these GSEs are restricted by law to purchasing mortgages below a specific amount, which is the conforming loan limit. The conforming loan limit can change each year. For 2016, the limit is $417,000 in most of the United States, except for a few areas where housing costs are higher than average. In Florida, the conforming loan limit is $529,000 in Monroe County, and $448,500 in Collier County, and $417,000 for all other counties.

Going big

If you’re buying a home that costs more than the conforming loan limit in your area, you’ll need a jumbo loan. Guidelines for jumbo loans can also change from year to year, but currently, the maximum value for a jumbo loan is $8 million.

Of course, lenders that extend jumbo mortgages typically have some requirements that borrowers must meet, such as:

  • A down payment. Lenders used to require at least a 20 percent down payment, or have at least 20 percent of your home’s value in equity if you’re refinancing. Some lenders may allow down payments of less, in exchange for higher interest rates.
  • Thoroughly documented income. In general, you can expect to document at least two years’ of steady income.
  • High credit scores. Generally, you’ll need at least a 680 score for most jumbo loans, but the higher your score, the better rates you’ll be able to find.
  • A low debt-to-income ratio. Often, jumbo loans will restrict borrowers to a specific DTI. The Consumer Financial Protection Bureau requires the majority of jumbo mortgages to be “qualified” by specific standards. For a qualified jumbo mortgage, a borrower’s DTI can’t exceed 43 percent, meaning the monthly house payment can’t be more than 43 percent of the borrower’s pretax income.

Flexibility

Even with those general requirements, jumbo mortgages in Florida can offer a significant amount of flexibility for the right borrower. The lenders typically set the terms and requirements, and those can vary significantly. Embrace Home Loans can help you determine what jumbo loan may be right for you. We have expert lenders who understand the mortgage market and can guide you to the mortgage you need. Call us at 407-733-6425, and let us help you get a mortgage that’s big enough to meet your dreams.

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