Can I Get a Jumbo Loan with 10% Down Payment?

A jumbo loan is a mortgage loan that exceeds the conventional conforming loan limits. When a Fannie Mae or Freddie Mac loan does not cover a full loan amount, such a loan is referred to as a jumbo loan, also called "non-conforming loan". Both Fannie Mae and Freddie Mac set the limit to the amount obtainable for mortgage loans. They are the largest buyers of mortgage loans which they repackage and sell therefore allowing the banks more liquidity to make more loans.

Currently in 2011, the conforming loan limit is $417,000 for a single unit property. A two-family (duplex) property is given at maximum of $533,850; a triple-unit dwelling is available at maximum of $645,300 and a four unit property at $801,950. Any property higher than this is considered to be categorized as non-conforming and has its own regulations.

In Alaska and Hawaii, the maximum loan limit for a single unit is $625,000; a two unit, $800,775; a three unit, $967,775; and a four unit, $1,202,925.

The need for jumbo loans arose because of property which are bought in high priced areas but can not be financed with conforming loans. Jumbo loans have a high risk and so their interest rates are much higher than the conventional conforming loans. The spread in risk for jumbo loans and conventional fluctuates between 0.25 and 0.5 percent for the most part.

Can you get a jumbo loan with a down payment of 10% is a question that arises every now and then. With the expanded conforming-jumbo loan limits in designated high-cost areas in the country, the answer is "Yes" but only if your county was given the expanded high-balance loan limits in effect until Oct 1, 2011 (un;ess extended). You can find this out by checking the jumbo rates page and clicking on your state. If your county is eligible, then you can get up to $729,750 on 90% financing with a low interest rate

Otherwise, the cold hard truth is that right now you would be asked to present a down payment of not less than 20%. This is because the economy has changed and things are not as they were previously where lenders were approving borrowers left and right. In those days, down payments were as little as 5%.

Update: July 2011

90% jumbo loans with "full documentation" is available in AZ, CA, CO, FL, MI, OR, UT, WA to $1.1 Million -
»»   Apply Now ««

Borrowers Need to have:
• 760 credit score or higher
• Purchase or Refinance (no cash back)
• Rates range from 4.5% to 5.75%
• Must Document Income and Assets for 2 years
• No Prepayment Penalty

So what one needs to do now is shop around and go over rates from one lender to the next and see which has better terms and conditions.

Most jumbo loans are being offered by the big banks that would rather not sell them to the secondary market will reap the rewards of the higher rates they provide. Traditional banking institutions like Bank of America, ING, U.S. Bank, Wells Fargo, PNC Bank, GMAC Mortgage and MetLife Bank are the top names offering jumbo loans.

It can be more expensive to refinance a jumbo loan because of the closing costs. Some lenders will offer the service of an agreement to consolidate and extend, for the purpose of a jumbo refinance transaction avoiding the mortgage associated tax payment recurring on the identical principal loan balance. While others will offer a no closing cost niche program to entice borrowers.

In order to obtain a true jumbo loan, a down payment has to be made.

In the years 2003 to 2007, lenders aggressively sought out customers and so to attract them, they dropped their down payments to as low as even 5 percent or zero down when combined with a 2nd mortgage. But today with the return of the jumbo loans, it is now being offered for at least 20 percent with even stricter conditions.

Before you can get an approval for a jumbo loan you must have satisfied the following requirements:

» Making a minimum down payment of 20 percent of the loan you are seeking.

» A full record of your income for the last 2 years

» Your monthly mortgage payments will be 38 percent of your income before taxes.

» Your Credit Score needs to be above 720 (some lenders will allow 680)