Jumbo loans are loan amounts above local conforming loan limits, in most locations the 2025 conventional loan limit is currently $806,500. Things have changed somewhat over recent years with Jumbo loans and these changes have made them more attractive, primarily as it relates to jumbo interest rates and structuring loans.
For some lenders not very experienced in the jumbo market, consumers might get the impression the lender doesn’t want to issue a jumbo loan. Why? One of the first things some loan officers do is to find ways around a jumbo mortgage and get a bit more creative with your purchase. Yet that might very well be a mistake, especially so for those with higher credit scores and greater down payment.
In the past, say pre-2015, fixed jumbo interest rates could be more than 1.5% higher than for a conforming loan under the same circumstances. If a conforming rate was at 4.5% on a $600,000 loan a jumbo rate might be somewhere around 6.0% on a $900,000 mortgage. Using a 30-year fixed rate of 6.0%, the 1.5% is a significant difference, especially on these larger loan amounts. That’s why some loan officers will run different scenarios in order to avoid the perceived pain of a jumbo rate.
The first strategy is to ask if there are additional funds available for a larger down payment to get the loan at or below the conforming loan limit. That’s the easiest way to get a conforming rate. Just don’t borrow as much. Yet, the borrowers may not have or want to put their funds down as equity.
The next method is to take two mortgages, keeping the first mortgage loan at the conforming limit and taking out a second lien to make up the difference between the down payment and the first lien. This is commonly referred to as a piggyback loan setup.
But in today’s environment, jumbo lenders and banks are getting much more aggressive in the jumbo purchase market, and the jumbo rate might very well be the better choice. It really just depends on the individual borrower and their situation. It’s not uncommon today for a jumbo rate to be the same or very near the same as the conforming quote, making the jumbo payment lower than a first and second combination.
One more thing to remember, select lenders now offer up to 95% financing (single loan) on jumbo loans, up to $1,500,000 loan amount on purchase and Jumbo refinance options. Additionally, many of these programs do not require private mortgage insurance. Please read more about 5 percent down payment options on our home page.
Questions? Please contact Jumbo Mortgage Source at Ph: 800-962-0677 or just submit the Quick Contact Form located on this page.