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Jumbo Loans: How to Stay on Budget in Today's Competitive Market

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Your dream home may be on the beach where you want to spend your retirement years, a cabin in the woods far away from everyone and everything. Or it might be a farm with plenty of acreage for your children to run around, but whatever scene makes up your dream home, it typically comes with something else: a home loan. We all know buying a home is an investment, but in certain parts of the U.S. it’s an even larger investment than you may have realized. That’s where a jumbo loan comes into play.

What is a jumbo loan?

Fannie Mae and Freddie Mac have regulations on what can be considered a conforming conventional loan and adhere to a conforming loan limit of $548,250 (in most counties). This means if you need to borrow more than that, you will not qualify for a typical conforming conventional loan and a better option may be a jumbo loan.

A jumbo loan is a non-conforming loan not backed by Fannie Mae or Freddie Mac. Since they are not backed by a federal agency, they are deemed to be privately-held mortgages. So, if you borrow more than the conforming loan limit that’s allowed in your county, you’ll need to apply for a jumbo loan. 

General loan limits for most counties are under $548,250 and high-cost area loan limits are under $822,375. These loan limits typically change each year.


Fannie Mae and Freddie Mac are mortgage companies funded by the federal government. They do not lend funds to individuals directly, but they provide those funds to lenders (like Churchill) to identify, underwrite, and transfer funds to individuals. This allows lenders to create more loans for home buyers. Because Fannie Mae and Freddie Mac are funded on a federal level, they must follow laws put in place by the Federal Housing Finance Agency.


Why would you need a jumbo loan?

Today’s real estate market is competitive, and many entry-level homes are priced well above the conforming loan limit. For instance, a starter home in San Francisco could be well over $800,000. Due to higher cost markets, a jumbo loan may be necessary because it allows you to borrow a higher amount of money.

How do you qualify for a jumbo loan?

While some lenders may allow as little as 10% down for a jumbo loan, most will require a down payment of at least 20% to qualify.

With a jumbo loan, you may also see a higher interest rate due to the size of the loan. But remember: The amount of your down payment as well as your debt-to-income ratio, credit score, and your assets will be determining factors as well.

For most conforming conventional loans, a credit score of 620 is needed but many lenders may require a higher credit score. For jumbo loans, lenders will likely require a FICO score of 700 or higher.

How do I stay on budget with a jumbo loan?

Make sure you feel comfortable with the amount of money you will be spending on a mortgage by doing some budgetary planning. Here are four ways to stay on track with your financial goals and purchase your dream home:

1. Keep other debts low

Life has a funny way of sneaking up on us, and it’s easy to let things like credit cards, student loans, and car payments become overwhelming. Make sure you are paying these debts on time (and sooner, if possible, so you can eliminate debt) to keep your debt-to-income ratio low. This will help you when taking on a mortgage.

2. Buy secondhand

If taking on a jumbo loan you may choose to make some cost-effective sacrifices in other areas. For example: Choose to furnish your home with items passed down from other family members or bought secondhand. Check out your local yard sale for tools or kitchenware and think about buying refurbished or reconditioned electronics instead of splurging on expensive brand-new products.

3. Put more money toward your down payment

A jumbo loan is going to require a larger down payment because you are borrowing more money. By putting at least 20% down up front (and even more if you can) you will set yourself up for success and pay less money over the life of your loan. Your Home Loan Specialist will be able to guide you toward the best options available for you.

4. Work with a Home Loan Specialist you trust

A loan expert will guide you through the home buying process and educate you on exactly how your loan will work. They will also help you decide which loan is best for you, your budget, and your financial goals. Make sure you work with someone you trust and will help you understand what’s going on with your finances.

Is it smart to get a jumbo loan?

In some markets, getting a jumbo loan may be your only option due to the prices of homes. Whether you choose to take on a mortgage in the form of a jumbo loan or a different type of home loan, Churchill is here to help. We want to see you win, and our team is ready to help you buy your dream home whenever you are!

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