Jumbo Home Loan Limits: Everything You Need to Know

jumbo home loan limits

Applying for a jumbo loan? Learn everything you need to know about jumbo home loan limits in 2024.

If you are in the market for purchasing a luxury home, or looking to invest in a property in a high-cost area, jumbo loans are among the best loan options you have to get the extra funds you need. 

However, jumbo loans have their own unique characteristics – as opposed to conventional or government-backed loans, they exceed the financing limits set by the Federal Housing Finance Agency. This means that factors such as interest rates, repayment terms, application criteria, and down payments may differ from your typical home loan.

Another characteristic that makes them different is the limit of the loan. In this article, we will discuss everything you need to know about jumbo home loan limits in 2024, and what are some of the most important things you will have to keep in mind before applying.

What are jumbo loans?

Jumbo home loans are mortgages that exceed the conforming loan limits set by Fannie Mae and Freddie Mac – $766,550 in most US areas. This makes them non-conventional loans, or loans that don’t meet the guidelines set by government-sponsored enterprises.

This type of mortgage is primarily designed for financing luxury properties and homes in highly competitive real estate markets. 

Since they pose a greater risk to lenders due to the larger amount of the loan, they usually require higher credit scores and larger down payments, as well as more extensive documentation. 

Jumbo home loan limits vs conventional home loan limits

The loan limit is a key factor in distinguishing the type of loan that you can qualify for. But what is the difference between conventional and jumbo home loan limits? Let’s take a quick look:

Conventional home loan limits

  • National baseline limit – they have a national baseline limit that applies to most areas of the United States. As of 2024, the limit for single-family homes is $766,550, compared to $726,200 in 2023. Conventional loan limits are generally reviewed every year based on the average price of homes in the US.
  • Set by government-sponsored enterprises – conventional loan limits are established by Fannie Mae and Freddie Mac, the government-sponsored enterprises that buy and guarantee mortgages from lenders.
  • High-cost areas – as we mentioned earlier, there are regions where the prices of real estate are significantly higher than the national average. In these cases, the conforming loan limit can increase up to $1,149,825.

Jumbo home loan limits

  • No universal limit – since jumbo loans are not regulated by government-sponsored enterprises, they don’t have a universal limit. In fact, their main characteristic is that they exceed the conforming limit. 
  • Set by individual lendersjumbo home loan limits are not set by Fannie Mae or Freddie Mac. Instead, they are set by individual lenders based on their application criteria and risk assessment. 
  • Region-specific – although there is no fixed upper limit for jumbo loans, the minimum amount starts just above the conforming loan limit. They can vary depending on the lender, the location of the property, and the financial situation of the borrower.

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What are the factors influencing jumbo home loan limits?

Jumbo home loan limits are influenced by several factors, which are not standardized and can vary significantly between lenders. However, some of the most common ones include:

Local housing market prices

As we mentioned earlier, some areas have higher real estate prices than the national average, which means that lenders might offer higher jumbo loan limits to accommodate the cost of purchasing a home.

Such areas typically include major metropolitan areas or desirable coastal regions, like San Francisco, New York City, Los Angeles, Miami, San Diego, and Seattle. 

Lender risk tolerance

Since jumbo home loans are not regulated or standardized by government-sponsored organizations, lenders are free to determine their own risk tolerance when setting jumbo home loan limits

This means that a lender with higher risk tolerance is more likely to offer a larger loan amount than a conservative lender with lower risk tolerance. 

They will mostly base their decision on the borrower’s creditworthiness, as well as other factors such as the percentage of down payment, and the presence of cash reserves.

Borrower’s financial profile

Another factor that highly influences jumbo home loan limits is your financial profile as a borrower. In other words, how creditworthy are you, and how likely are you to default on your loan? If your profile is riskier, the loan that the lender may be willing to give you will be lower.

When assessing your financial profile, lenders will consider your credit score, debt-to-income ratio, cash reserves, and overall financial stability. If you have a stronger financial profile, you may be able to access higher loan amounts.

Economic conditions

Among the factors that influence jumbo home loan limits are the current economic conditions, both nationally and globally. Overall interest rate environment, inflation, and the housing market dynamics are among the variables that lenders take into account. 

Other broader factors include strong economic growth and high consumer confidence, which can lead to more transactions in the high-end real estate market. This buoyancy can increase the demand for jumbo loans.

International economic conditions, such as global financial crises or trade tensions, can also affect the U.S. economy and, by extension, the jumbo loan market. For instance, foreign investment in U.S. real estate can influence property values and the demand for jumbo loans.

Regulatory environment

While jumbo loans are not directly regulated by government entities, it doesn’t mean that they are not impacted by the overall regulatory environment. For example, in a recession, regulators might implement policies to stimulate the economy that indirectly benefit borrowers, such as lower interest rates.

Conversely, in an overheated economy, measures to cool down the market could indirectly tighten the conditions for obtaining a jumbo loan. All of this impacts lender practices, and, indirectly, jumbo home loan limits as well. 

What are the requirements to qualify for a jumbo loan?

Now that we have a better understanding of the jumbo home loan limits, let’s take a look at the requirements that you’ll need to meet if you want to qualify for a jumbo loan. While they may vary by lender, generally we are looking at:

  • Credit score of 700 or above – jumbo loan criteria is usually stricter than the one of conventional loans, because larger loan amounts are associated with higher risk for the lender. For this reason, a credit score of 700 or higher is preferred.
  • Debt-to-income ratio of less than 43% – the Debt-to-Income ratio, also known as DTI, is also stricter compared with conventional or government-backed loans. Usually, lenders will require a DTI of 43% or less.
  • Down payments –  you should also prepare to provide a larger down payment for jumbo loans compared with regular home loans.
  • Cash reserves – if the loan amount that you are asking for is very large, lenders may also require you to have significant cash reserves in the bank after closing, sometimes up to 12 months of mortgage payments.
  • Property appraisal – a more stringent property appraisal might be required to ensure the property’s value justifies the loan amount. Sometimes, the property may have to pass through multiple appraisals.
  • Income verification – including W-2 forms, pay stubs, tax returns, and other proof of income that shows that you have a stable income.
  • Employee verification – lenders often send a VOE form directly to the borrower’s employer to confirm employment status, length of employment, position, and salary.

How to apply for a jumbo loan

If you are meeting the jumbo loan criteria and are aligned with the jumbo home loan limits, you can easily apply for a jumbo loan with Jet Direct Mortgage. Apply now to jump-start your process to your dream home. 

About Jet Direct Mortgage

If you are ready to buy the property of your dreams, Jet Direct Mortgage can help you find the perfect loan fit for your needs and goals. Our mission is to set a high standard in the mortgage industry through unmatched customer service, from the application process to the post-closing stage.

Our team of experienced professionals will guide you through the home loan process step by step, so you feel confident in your knowledge and make a well-informed decision on the best mortgage for you. 

Are you ready to get started? Apply now for your jumbo loan!

FAQ

What are the current jumbo loan limits?

Jumbo home loan limits vary by location and are not set by the FHFA, unlike conforming loans. Generally, any loan amount exceeding the conforming loan limit of $766,550 in most areas, or up to $1,149,825 in high-cost areas, is considered a jumbo loan. 

However, these figures can vary significantly based on local real estate markets and lender criteria, so it’s essential to check with specific lenders for their current jumbo loan limits.

How do jumbo loan limits vary by region?

Jumbo loan limits vary by region due to differences in housing market prices. In areas where property values are significantly higher, such as major metropolitan areas or desirable coastal regions, the threshold for jumbo loans is elevated to accommodate the higher cost of real estate. 

Conversely, in regions with more average housing prices, the limit for what constitutes a jumbo loan aligns more closely with the national conforming loan limits. These regional adjustments ensure borrowers can access financing that reflects local market conditions.

What differentiates a jumbo loan from a conventional loan?

Jumbo loans exceed the conforming loan limits set by Fannie Mae and Freddie Mac, requiring higher credit scores, down payments, and stricter underwriting standards. Unlike conventional loans, they can finance luxury properties and high-cost homes, but often at higher interest rates.

What documentation is needed to apply for a jumbo loan?

Applying for a jumbo loan requires comprehensive documentation: proof of income (W-2 forms, pay stubs), tax returns, bank statements, assets, credit history, and a detailed list of debts. Additionally, lenders may request proof of cash reserves and a property appraisal.

How does the property appraisal process work for jumbo loans?

The property appraisal process for jumbo loans involves a thorough evaluation by a licensed appraiser to determine the property’s market value. Given the higher loan amounts, appraisals for jumbo loans are often more detailed, sometimes requiring multiple appraisals. 

The appraiser assesses the property’s condition, location, and comparable sales in the area, ensuring the loan amount does not exceed the property’s worth. This process helps mitigate risk for lenders.