People are taking advantage of today’s attractive interest rates to purchase upscale homes, often using one financing tool: the Jumbo loan. Let’s look at this mortgage option and when it works best.

Jumbo Loans: The Basics

A jumbo loan is a conventional mortgage that exceeds the loan amount set by the Federal Housing Finance Agency (FHFA). In 2024, the FHFA set the limit for a single-family home at $766,550. Any mortgage purchased or guaranteed by Fannie Mae or Freddie Mac, both regulated by the FHFA, needs to be within this limit. Jumbo loans, however, do not.

When You Want a Jumbo Loan

When buying a luxury home. Higher-end homes often have price tags that exceed the FHFA’s limit. Thus, luxury home buyers turn to jumbo mortgages to borrow higher amounts. The financing option is increasingly popular in Dallas, which ranks high among U.S. cities with the highest shares of luxury homes. Last year, sales of luxury homes doubled in Dallas-Fort Worth.

Qualifying for a Jumbo Loan

Without backing from Freddie Mac or Fannie Mae, jumbo loans are riskier for lenders and may have requirements that exceed other mortgage types. Beyond income verification, jumbo loan conditions include liquid assets (cash or cash equivalents) to cover six months of mortgage payments. Borrowers looking to qualify for jumbo loans should have credit scores above 700 and debt-to-income ratios under 43%*.

The Benefits of a Jumbo Loan

  • Competitive interest rates. Even though they carry more risk for lenders, jumbo loans often have rates that are comparable to other conventional mortgages.
  • Affordable down payments. While a requirement to put 20% or higher down can be the case with some loan types, it may not be so with a jumbo loan. 10% to 15% of the purchase price is common. However, with 20% down, you can avoid paying for private mortgage insurance.
  • Versatility. Jumbo loans are available for fixed- and adjustable-rate mortgages. Borrowers can use business funds for closing. Plus, you can refinance a jumbo loan in the same way as other mortgage types.
  • Fast approval. With in-house approval, potential borrowers can get loan approval quickly.

The Dallas luxury housing market is going strong with no signs of slowing. To join that market, contact a loan expert at the Decker Group to talk about jumbo loans and other financing options. Call us at (972) 591-3097 or contact us online.

*Guidelines subject to change. Consult your loan officer for the latest guidelines.