High home prices result in jumbo mortgages

Home prices have shot up in some areas of the U.S. to the point where buyers need jumbo loans to finance them. In mortgage speak, jumbo refers to loans that exceed the limits set by the government-sponsored enterprises that buy most home loans and package them for investors.

Jumbo mortgages, or jumbo loans, are those that exceed the dollar amount loan-servicing limits put in place by GSE’s Freddie Mac and Fannie Mae. This makes them non-conforming loans.

As of 2018, these limits are $453,100 in all states except for Alaska, Guam, Hawaii and the U.S. Virgin Islands, where the limit is $679,650. The conforming limit is higher in counties with higher home prices, so be sure to check your area’s loan limits.

The maximum loan amount varies by lender. Borrowers can get fixed- or adjustable-rate jumbo mortgages with various term options. The mortgages can be used for primary homes, as well as for investment properties and vacation homes.

The three common hur- dles borrowers must clear to get jumbo-loan approval are larger income, higher credit scores and greater reserves.

Borrowers whose scores fall beneath the normal requirements usually have to offset it with a low debt-toincome ratio.

Borrowers should be prepared to show enough reserves, or assets, to cover between six and 12 months’ worth of mortgage pay- ments. The down payment on jumbo loans are, on average, between 10 and 20 percent.