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Home prices have been rising rapidly in the United States over the past few years and there's no reason to think this will reverse course anytime soon. Because of this, more borrowers are finding that the conventional mortgage loan limits simply aren't high enough to meet their home-buying needs. Fortunately, the best jumbo loan lenders offer mortgages with amounts ranging from the conventional loan maximum all the way to tens of millions of dollars.
Here, we'll discuss some of the most important concepts for jumbo loan borrowers to know, as well as a shortlist of the best jumbo loan lenders to help start your search.
4.5/5
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Bottom Line
Better has the right combination of features and perks, including no unnecessary fees, low mortgage rates, and a fast, 100% online application process. Better Mortgage does not charge lender fees such as those for origination, application, processing, and underwriting. As a result, Better states that home buyers save $8,200 and customers who refinance save $8,200 over the life of their loans.In addition, Better states that applicants can get a personalized rate and a pre-approval in minutes. This can help buyers cut their costs while saving time. The lender also offers $150 off closing costs when applying through Motley Fool Money site.
Min. Credit Score
580 FHA
620 Conventional and VA
700 Jumbo
580
Min. Down Payment
0% - 3.5%
Key Features
One Day Mortgage. Lock a rate, get a Commitment Letter in 24 hours. Terms apply.
Close 17 days faster than industry average
Apply 100% online, entirely on your schedule
Better Price Guarantee: Better will match any valid competitor's offer, and credit you an extra $100. If Better can't, the $100 is yours to keep after you close on your loan.
5.0/5
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Bottom Line
Rocket Mortgage led the transition to a full digital experience and online-only applications. Its seamless process is one reason Rocket Mortgage is consistently ranked in the top two on J.D. Power's customer service rankings. Rocket Mortgage has a robust and high-quality app that makes it easy to use.
5.0/5
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Bottom Line
No lender fees for qualified existing customers, along with a fully online experience make it a top pick. One of the rare lenders to offer jumbo loans up to $30 million. Axos also offers a mortgage with rewards, giving up to 3% cash back every year.
4.5/5
Our ratings are based on a 5 star scale.
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Bottom Line
The diverse set of loan products and terms and relationship discounts make it a top pick, particularly for first-time home buyers and people interested in FHA loans. The high customer satisfaction ratings are the cherry on top.
4.0/5
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Bottom Line
Ally Mortgage is a strong fit for borrowers looking for a fixed-rate, adjustable-rate (ARM), or jumbo loan. The caveat is you probably need good or excellent credit, and you should be comfortable filing out the application online.
Best for: Diverse options and homebuyers building credit
New American Funding
Rating image, 4.5 out of 5 stars.
4.5/5
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Bottom Line
New American Funding is one of the largest privately owned direct mortgage lenders in the country. The lender offers competitive rates. Its selection of loans and customizable loan terms is broader than many other lenders'. The lender also has a highly efficient lending process that allows for quicker closing times. What's more, New American can be a good solution for people building credit and wanting a good mortgage. It focuses on lending to underserved communities.
Min. Credit Score
500 FHA
620 other mortgage products
500 - 620
Min. Down Payment
0% VA
3% Conventional
3.5% FHA
0% - 3.5%
Key Features
Fast service
One of the top lenders to Hispanic and Black borrowers.
Offer customizable loans, including home addition loans
High customer satisfaction, A BBB rating
Loan Types
Conventional
FHA
VA
USDA
Jumbo
Interest Only
Fixed Rate Terms
Customizable (8 - 40 years)
Adjustable Rate Terms
10/1 and 10/6, 7/1 and 7/6, 5/1 and 5/6
How does a jumbo mortgage work?
Because they aren't eligible for purchase by Fannie Mae and Freddie Mac, jumbo loans are a significantly larger risk for the banks and other lenders that make them. And naturally, because of their high balances, this risk is substantial.
As a result, jumbo mortgage loans typically have relatively strict qualification standards, higher interest rates than a comparable conforming loan, or both. For example, you can get a conforming loan with a credit score as low as 620. But for a jumbo loan, a borrower with this score would likely face an uphill battle. And unless you're a very strong buyer, you might get a jumbo mortgage interest rate that's significantly higher than the conforming loan average.
Most jumbo lenders don't publish their credit score requirements. However, they generally do want to see above-average credit, meaning a score in the 700s or higher. You're also unlikely to find a jumbo loan with a down payment requirement under 20% (although we've seen 10% down payments with a few jumbo lenders for highly qualified borrowers). And unlike with certain conventional mortgage situations, lenders are unlikely to accept high debt-to-income ratios or other adverse factors.
TIP
How much will my monthly mortgage payment be?
Use our mortgage calculator to help you estimate your monthly mortgage payments using various loan terms, insurances, and taxes.
Qualifications for a jumbo loan
When it comes to conventional mortgage loans, qualifications are rather standardized. While lenders can use tighter standards than the minimums required, there's an eligibility matrix lenders use when underwriting conforming loans. But with jumbo loans, qualification is largely determined by the lender.
Having said that, you can expect some pretty strict qualifications. While these are not set-in-stone rules, banks and other lenders that offer jumbo mortgage loans typically want to see:
FICO credit score of 700 or more. Some want even higher scores for jumbo loans.
Down payment of at least 20%, because jumbo loans are typically not eligible for private mortgage insurance (PMI). Exceptions are possible, but you don't find the 3%-to-5% down payment options that exist for conforming loans.
Maximum debt-to-income ratio of 45%. This is calculated including all of your other monthly debt obligations, such as credit card payments, in addition to the proposed mortgage payment.
Reserve requirements that are typically higher than Fannie Mae and Freddie Mac's standards.
How to choose a jumbo loan lender
Jumbo loan qualifications and the details of the loan programs and terms available vary dramatically between mortgage lenders. So it is extremely important to shop around.
With jumbo loans, small differences in interest rates can make an enormous difference over time. For example, on a $1 million, 30-year fixed-rate jumbo home loan, borrowing at 6.5% instead of 6.75% means almost $60,000 in interest savings over the life of the loan.
Our suggestion? Start with our list of the best jumbo lenders. Pick a few whose loan products and qualification standards sound like they meet your needs. Then apply for a pre-approval with all of them. It won't hurt your credit to do so (the FICO formula specifically allows for rate-shopping) and it could potentially save you tens of thousands of dollars.
Comparing interest rates from different lenders is the best way to get the most competitive rate. Check out today's jumbo mortgage rates to get started!
The obvious advantage of jumbo loans is that they aren't limited by size. In markets where the average home price is in the ballpark of $1 million or higher, conforming mortgages aren't much help to the typical buyer. And, because loan qualification is determined by lenders, they might be more inclined to take your personal situation into account. Finally, you typically don't have to pay mortgage insurance on a jumbo loan, even if you find one with a down payment under 20%.
On the other hand, there are some big disadvantages. We've already mentioned the potentially stricter qualification standards and higher mortgage rates. It's also worth noting that jumbo loans can have significantly higher closing costs than conforming loans, especially if you plan to borrow millions of dollars. For example, before a lender makes a massive mortgage loan that it intends to hold on its own balance sheet, it may require several appraisals of the property you want to buy.
Tips for comparing jumbo loan lenders
Even if you are a highly qualified buyer, you're likely to get significantly different interest rate offers from different lenders. Remember -- jumbo loans aren't a standardized product like FHA loans or conforming mortgages. There's more difference between underwriting methods of each mortgage lender.
Most major mortgage lenders offer jumbo loans, but the right lender for you can vary. The best course of action is to start with our top picks, choose a few that seem to be the best fit, and apply with all of them to see which offers you the best rate.
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
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We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor
Rating image, 4.5 out of 5 stars.
4.5/5
Our ratings are based on a 5 star scale.
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We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor
5.0/5
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5 stars equals Best.
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Rating image, 5.0 out of 5 stars.
5.0/5
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5.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
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Rating image, 5.0 out of 5 stars.
5.0/5
Our ratings are based on a 5 star scale.
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We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor
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Rating image, 4.5 out of 5 stars.
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
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We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor
4.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
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We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor
Rating image, 4.0 out of 5 stars.
4.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
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1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor
Rating image, 4.5 out of 5 stars.
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor
A jumbo loan is a mortgage whose balance is too high to meet Fannie Mae and Freddie Mac's lending standards. Because of this, jumbo loans are ineligible for purchase by the government-sponsored agencies, so banks (or private investors) take the risk.
If the amount of money you need to borrow for your next home purchase exceeds the conforming loan limits in your area and you are a well-qualified home buyer, a jumbo loan could be the solution.
Jumbo loans can have higher interest rates than conventional mortgages, but not necessarily. In fact, because jumbo lenders often have significantly higher credit score requirements than conforming lenders, it isn't uncommon to see jumbo loan interest rates lower than what the average borrower would pay on a conforming loan.
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