The coastal charm of Savannah is alluring to many home buyers. Its rich history, beautiful architecture, and welcoming atmosphere make it an ideal place to settle down. But finding the perfect home in more expensive locations often means needing a jumbo loan. In this post, we will explore the ins and outs of jumbo home loans and how they can be a viable option for home buyers in Savannah.
Understanding Jumbo Loans:
What is a Jumbo Loan in Savannah?
Jumbo loans are mortgage loans that exceed the conforming loan limits established by the Federal Housing Finance Agency (FHFA). In all of Georgia, Chatham County included, this limit is set at $806,500 for a standard one unit property. When your mortgage amount surpasses this figure, it enters the realm of jumbo loans.
Maximum Baseline Loan Amount for 2025
Units | GEORGIA | |
1 | $806,500 | |
2 | $1,032,650 | |
3 | $1,248,150 | |
4 | $1,551,250 |
Why Some Buyers Might Require a Jumbo Mortgage?
Savannah’s real estate market is diverse, featuring everything from historic homes to modern luxury residences. The high property values, especially in the costal areas and midtown, often mean that standard conventional or FHA loan limits may not suffice. This makes jumbo loans an essential financial tool for many buyers of luxury properties.
Differences Between Jumbo Loans and Conforming Loans
Jumbo loans differ from conforming loans in several ways, including interest rates, qualification requirements, and down payment expectations. Understanding these distinctions is crucial for potential borrowers.
Advantages of Jumbo Loans:
Access to High-Value Properties
One of the primary advantages of jumbo loans is the ability to finance high-value properties. In Savannah, where historical and luxury homes frequently come with hefty price tags, a jumbo loan can make the dream of owning such a residence a reality.
Competitive Interest Rates
Contrary to popular belief, jumbo loans don’t always come with exorbitant interest rates. In fact, many lenders and banks offer competitive rates that can be comparable to or even lower than those of conforming mortgages, depending on the loan term. This makes jumbo loans an attractive option for qualified buyers.
Flexible Down Payment Options
Gone are the days when a 20% down payment was mandatory for jumbo loans. Select lenders now offer jumbo financing options with as little as 5% down payment, making it more accessible for first-time home buyers and those looking to invest in higher-value properties.
Eligibility and Requirements for Jumbo Loans:
Credit Score Requirements
Jumbo loans typically require a higher credit score compared to conforming loans. Lenders look for scores in the range of 680 and above, when financing over 90% loan to value. Lower credit borrowers may be approved with greater down payment of 15%+
Income and Employment Verification
Lenders will scrutinize income and employment history more closely for jumbo loans. Borrowers need to provide detailed documentation to demonstrate their ability to manage the loan payments. This includes the most recent two years of W’2, tax returns and recent pay stubs for regular employed buyers. For self-employed borrowers, generally a two-year average of income will be used for qualifying. Self-employed buyers also have special bank statement qualifying programs available.
Asset and Liability Assessment
A thorough assessment of assets and liabilities is part of the jumbo loan application process. Lenders want to ensure borrowers have sufficient reserves and manage their existing debts responsibly. Most lenders generally prefer total debt to income ratios below 48%.
Jumbo Loan Down Payment Options:
Traditional 20% Down Payment?
While traditional jumbo loans have required a 20% down payment, this is no longer the only option. However, this substantial down payment can significantly reduce monthly payments and offer the lowest interest rates. The good news is no monthly PMI (mortgage insurance) is required even on reduced down payment options with 10% or 5% down. Lender can often work around this by offering a combo piggyback or simultaneous second mortgages.
10% Down Payment:
With a 10% down payment, the primary loan covers the first 80% of the purchase price, while the second mortgage covers the remaining 10%. The borrower then puts down 10%, making it an “80-10-10” structure.
5% Down Payment:
The same principle applies for a 5% down payment option, except that the borrower would put down only 5%, with the remaining amount split between two loans.
Steps to Obtaining a Jumbo Loan:
Pre-Approval Process
Getting pre-approved for a jumbo loan involves a comprehensive review of financial documents and credit history. The pre-approval process is quick and generally takes 15-20 min on the phone or by completing an online application. This will provide a clear budget and strengthens your position when making an offer on a home.
The application process for a jumbo loan is more detailed than that of a conforming loan. Be prepared to provide extensive documentation and undergo a thorough review by the lender.
Common Myths About Jumbo Loans:
Myth 1: Jumbo Loans Have Exorbitant Interest Rates
Many believe that jumbo loans automatically come with higher interest rates. However, competitive rates are available, especially for borrowers with strong financial profiles.
Myth 2: Only Wealthy Individuals Qualify
Jumbo loans are not exclusively for the wealthy. Many middle-income buyers qualify, especially with the flexible down payment options now available.
Myth 3: Jumbo Loans Are Too Risky
While jumbo loans carry more risk for mortgage companies, they are structured with safeguards to ensure borrowers can manage their payments effectively. Proper financial planning and guidance can mitigate risks.
Finding the Right Property with a Jumbo Loan:
Researching the Market
Understanding the local real estate market in Savannah is key to finding the right property. Work with a knowledgeable real estate agent to identify properties that meet your criteria and budget.
Evaluating Property Value
Accurately evaluating property value ensures you are making a sound investment. Consider factors like location, condition, and future market trends.
Making an Offer
With pre-approval in hand, you can confidently make an offer on your dream home. Be prepared to negotiate and work closely with your agent and lender to finalize the deal.
Tips for Managing a Jumbo Loan:
Creating a Budget
Managing a jumbo loan requires careful budgeting. Plan for all associated costs, including taxes, insurance, and maintenance, to ensure you can comfortably manage your payments.
Monitoring Interest Rates
Keep an eye on interest rates even after securing your loan. Refinancing options may become available if rates drop, potentially saving you money over the life of the loan.
The Future of Real Estate in Savannah:
Savannah’s real estate market is expected to continue growing, making jumbo loans a valuable tool for buyers looking to invest in high-value properties. As the market evolves, new opportunities for buyers may arise.
In the beautiful, historic city of Savannah, jumbo loans offer a pathway to owning high-value properties that conforming or FHA loans can’t cover. With flexible down payment options and competitive interest rates, these loans are accessible to many home buyers. Whether you’re a first-time buyer or move up buyer looking to upgrade, understanding the benefits and requirements of jumbo loans is crucial.
Start your home buying journey today and explore the possibilities that jumbo loans can offer. Buyers can connect with us 7 days a week by calling or just submit the Quick Contact Form below.