For home purchases whose values exceed conforming loan limits, Peoples Bank Mortgage offers a variety of jumbo loan products with excellent rates and terms. When meeting established credit, income and down payment requirements, qualifying borrowers may be able to secure a loan as high as $2,500,000.
What is a Jumbo Mortgage?
A jumbo mortgage is a home loan with an amount that exceeds conforming loan limits imposed by Fannie Mae and Freddie Mac – the two government-sponsored enterprises that buy mortgages from lenders. Loans that exceed these maximums must be financed under a jumbo loan package. When meeting established credit, income and down payment requirements, qualifying borrowers may be able to secure a loan as high as $2,500,000. Jumbo loans are considered portfolio loans as they are not packaged and sold by Fannie Mae or Freddie Mac and therefore can have different qualification criteria depending on the particular investor.
Why Do Jumbo Loans Exist?
Fannie Mae and Freddie Mac purchase and resell roughly 90 percent of mortgage loans written by banks, which frees up the banks to offer more loans. These organizations set the conforming loan limits to optimize the number of loans they can securitize. When higher-value loans exceed the conforming minimums, the banks must assume responsibility for these loans independently of Fannie Mae and Freddie Mac – hence, the jumbo loan category.
How Do I Qualify for a Jumbo Loan?
Since jumbo mortgages are not backed by Fanny Mae or Freddie Mac, qualification requirements are a bit more stringent than those for conventional loans. Generally speaking, qualified applicants must have higher credit scores and debt-to-income ratios of 43% or less. Likewise, applicants may be asked for a minimum 20 percent down payment, provide two years’ documentation of reliable income and show enough money in the bank to cover at least 6 months worth of mortgage payments.