A jumbo loan is a mortgage that is larger than the loan-servicing limits set by the Federal Housing Finance Agency (FHFA). If you know you need a large loan to cover a higher home mortgage loan, you might be wondering how to qualify for a jumbo loan.
Key Points
• Jumbo loans are available for properties valued over $806,500, with higher limits in high-cost geographical areas.
• A credit score of 740 or higher is typically required for consumers to qualify for a jumbo loan.
• Down payments can be as low as 10%, but a higher amount can improve loan terms.
• A debt-to-income ratio below 43% is required for qualifying for a jumbo loan.
• Lenders often require up to 12 months of cash reserves to ensure financial stability.
Jumbo loan qualifications are more stringent than conforming conventional loans. Because a jumbo loan is a nonconforming loan, banks take on more risk as they are not able to sell the loan to government-sponsored enterprises Fannie Mae and Freddie Mac. Since the loans are not guaranteed by the government, lenders are more cautious about the type of borrowers they do business with.
What this means for your money: You need conditions to be pretty optimal to qualify for a jumbo loan. But it can be done. Learn more here, including:
• How to qualify for a jumbo loan
• What factors lenders consider when authorizing jumbo loans
• The jumbo loan qualification process
• How to decide if a jumbo loan is right for you
Jumbo Mortgage Requirements
The current limits for jumbo loans are defined as exceeding $806,500 for single-family homes, except in Alaska, Hawaii, and some federally designated markets that are considered high-cost. In those areas, the limit that’s exceeded is $1,209,750 since these locations tend to have pricier housing markets.
Jumbo mortgage requirements are similar to conventional conforming loan requirements, but there are some key differences that make them harder to qualify for.
A High Credit Score
Experts recommend a credit score of 740 or above for jumbo loan borrowers. A higher credit score when buying a house is indicative of a borrower’s behavior with credit and how likely they are to repay the loan. A higher credit score is needed for the higher loan amounts of a jumbo loan. That lofty score can help the lender feel more secure that you’ll pay back the amount you borrow.
Cash Reserves
A cash reserve is how much liquid money you have at your disposal. What counts as liquid money can vary from lender to lender. For example, some will allow a percentage of vested 401(k) funds to count toward the reserve requirement. Others do not.
Because jumbo loans are so large, lenders look for cash reserves in your account to guard against default. For the best jumbo loan terms, lenders can require as much as 12 months of reserves.
A Low Debt-to-Income Ratio
A debt-to-income ratio is the amount of income you make relative to the amount of debt obligations you have. If you have what is considered too much debt, the lender will not offer a loan to you. With jumbo loans, a healthy DTI ratio is essential to qualify for the mortgage. A DTI ratio below 43% is recommended.
What Does the Jumbo Qualification Process Include?
When you’re looking at jumbo loan requirements and the qualification process, there are some things you should keep in mind. Here, what’s needed to get a mortgage:
Documents Required for Jumbo Loan
When you apply for a jumbo loan, the lender will look to verify the information you provided. Some documents you may be required to provide include:
• Two years of tax returns
• Profit & Loss (P&L) statement if you’re a business owner
• Pay stubs
• Bank statements
• Documentation for other income
Loan-to-Value Ratio Evaluation
In addition to your application, the jumbo loan will require an appraisal of your property to ensure they’re not lending too much on the home (that is, more than it’s worth). This appraisal will ensure the home’s price is not too high and determine that the loan-to-value ratio (LTV) is within its guidelines.
Evaluating How Jumbo Down Payments Will Impact You
How much you put down on the home of your dreams will impact what loan you qualify for. If you’re able to put down enough, you may be able to forgo the jumbo loan requirements and get into a conforming conventional loan.
Is a Jumbo Mortgage Right for You? Questions To Ask
When it comes to making a decision on a jumbo loan, it’s helpful to ask yourself some questions that can help determine if a jumbo loan will work for you.
Do I Have Good Credit?
Ask yourself if your credit is strong enough to qualify for a jumbo loan. These mortgages do come with higher loan amounts and higher payments, and a good credit score range (740 or higher, typically) can help you get the best terms possible to qualify for a jumbo loan.
Do I Have a Low DTI and High Cash Reserves?
It’s important to have a low debt-to-income ratio and ample reserves to qualify for a jumbo mortgage, as discussed above. While some lenders may go up to as high as a 43% DTI, others will want to see a lower number.
Can I Prove I’m in Good Financial Health?
Qualifying for a jumbo mortgage goes beyond the numbers. Can you demonstrate to the lender that you’re able to continue making payments? Do you have a consistent job history? Are all the other financial factors in your life lined up so you can afford the mortgage?
Is the Property Value High Enough for a Jumbo Loan?
The jumbo loan value minimum (and conforming loan limits) is $806,500 for most areas in the U.S. If your mortgage is below this amount, you’ll want to look at financing with a conforming conventional loan instead. In high-cost areas, the home would have to hold a value of more than $1,209,750.
Do I Have Enough Money Saved?
A down payment on a property that merits a jumbo loan will often be a significant amount of cash. And while some closing costs are a flat fee that won’t go up, many are labor-intensive or percentage-based (2% to 5% of the loan amount), so your jumbo loan closing costs are larger than for a conventional, conforming loan.
If you are in the market for a high-value home, a jumbo mortgage can help you make it your own. However, you will need to meet the loan requirements, which may be somewhat more demanding than those for a conforming loan. By focusing on optimizing your credentials and financial profile, you can work to secure the mortgage that makes your home-ownership dreams come true.
When you’re ready to take the next step, consider what SoFi home loans have to offer. Jumbo loans are offered with competitive interest rates, with no PMI, and down payments as low as 10%.
SoFi Mortgage Loans: We make the home loan process smart and simple.
FAQ
Is it harder to qualify for a jumbo loan?
Yes, jumbo loans are harder to qualify for. You will need a larger down payment than you would with a conforming loan, a higher credit score, a low debt-to-income ratio, more cash reserves, and a tighter loan-to-value ratio.
What credit score do you need for a jumbo loan?
For a jumbo loan, you may want to aim for a credit score above 740.
Do jumbo loans require a 20% down payment?
Sometimes they do. But it is possible to obtain a jumbo loan with a down payment as low as 10% or possibly even lower.
Photo credit: iStock/lovenimo
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
You’ll likely hear the terms home loan and mortgage used interchangeably, but the phrase “home loan” is an umbrella term that covers a variety of mortgages, home refinances, and home equity loans.
It’s helpful to understand the difference between a typical mortgage, used to buy a home, and the larger universe of home loans, which are sometimes used to tap the equity you’ve gained.
Key Points
• A mortgage is a specific type of home loan used to purchase a home.
• Mortgage types include conventional, jumbo, FHA, USDA, and VA loans, each with unique features.
• There are other types of home loans, including home equity loans and cash-out refinances.
• Both mortgages and other types of home loans are secured by the home.
• Mortgages are for purchasing a home, but some mortgages allow borrowers to also obtain funds to make essential renovations.
What Is a Mortgage?
Let’s get this straight: Mortgages are home loans, used when buying a home or other real estate. When you take out a mortgage, your lender is loaning you the money you need to purchase a home in exchange for charging you interest. You’ll repay the loan and interest in monthly installments.
Mortgages are secured loans, meaning the property is used as collateral. If you fail to make mortgage payments, your lender can foreclose on the home to recoup its money.
In order to take out a mortgage, you’ll typically need to make a down payment equal to a percentage of the purchase price. Your down payment is the portion of the cost of the home that you aren’t financing and provides immediate equity in the property.
Buyers may put down 20% on conventional mortgages to avoid private mortgage insurance (PMI), but many buyers put down much less. In fact, the median down payment for all homebuyers was 18% in 2024, according to a National Association of Realtors® report. A mortgage calculator can help you determine what effect the size of your down payment will have on your monthly payments.
When shopping for a home, you can seek mortgage preapproval. After investigating your financial history, your lender will provide you with a letter stating how much money you can likely borrow and at what mortgage rate.
Types of Mortgages
There are several types of mortgages available. Mortgage insurance, in the form of PMI or mortgage insurance premiums (MIP), may be part of the deal. It’s good to understand PMI vs MIP.
• Conventional mortgages are funded by private lenders like banks and credit unions. They are not backed by a government agency. You’ll typically need to pay PMI if you don’t make a 20% down payment; mortgage insurance is canceled when 22% equity is reached. Conventional conforming loans adhere to lending limits set each year by the Federal Housing Finance Agency.
• Jumbo loans are mortgages that exceed the lending limits set for conventional loans. So a jumbo loan is a “nonconforming” loan. Conventional lenders issue jumbo loans, and the U.S. Department of Veterans Affairs guarantees a VA jumbo loan, possibly with no down payment.
• FHA loans are made by private lenders and guaranteed by the Federal Housing Administration. You may qualify to make a down payment of as little as 3.5%. Upfront and annual MIPs are required, usually for the life of the loan.
• USDA loans are backed by the U.S. Department of Agriculture and help low- to moderate-income households buy property in designated rural and suburban areas. No down payment is required. An upfront and annual guarantee fee are required. (Note: SoFi does not offer USDA loans at this time, but we do offer FHA and VA loans.)
• VA loans are designed for active-duty and veteran military service members and some surviving spouses. VA loans don’t require a minimum down payment in most cases. There’s no MIP; there is a one-time funding fee.
What Is a Home Loan?
If a friend tells you they have a home loan, there’s a very good chance they are talking about the mortgage they used to purchase their home. But there is also a chance that they are referring to a home equity loan. As you ponder what is a mortgage vs. a home loan, it helps to get to know the home loans that aren’t purchase mortgages.
Types of Home Loans
A home equity loan is technically a second mortgage — assuming a homeowner is still paying their first mortgage. Home equity loans allow homeowners to borrow against the portion of their home they own outright. As with typical mortgages, home equity loans are secured using the home as collateral. But if an owner falls into foreclosure, in the home loan vs mortgage loan equation, the mortgage lender would be paid from the proceeds of the sale before the home equity loan lender.
The amount you’re able to borrow will be determined by a few factors, including your credit history and how much equity you’ve built — in other words, the current value of your house less any outstanding debt. The borrower may pay closing costs based on the loan amount.
It’s common for lenders to allow you to borrow up to 80%-85% of the equity you’ve established. The loan arrives in a lump sum. You repay the home equity loan with interest over a set period of time. If you miss payments, your lender can foreclose on the house.
A home equity loan is not to be confused with a home equity line of credit, or HELOC. A HELOC is also a second mortgage; your home equity is collateral. But it functions somewhat like a credit card. Rather than receiving a lump sum, you have a revolving line of credit and can borrow and repay the debt repeatedly as needed during a given time period — typically a decade.)
Another form of home loan is a cash-out refinance. In this case, a homeowner takes out a new loan to pay off their old one, but they also borrow a lump sum at the same time. What they can borrow is based on — you guessed it — their home equity.
Similarities Between a Home Equity Loan and a Mortgage
When you apply for a mortgage as part of the home-buying process, or when you seek a home equity loan as a homeowner, lenders will look into your financial history to help them establish terms and the interest rate for the loan. For example, they will examine your credit reports, often awarding more favorable terms and interest rates to those with higher scores. Mortgages and home equity loans are both secured loans. Both types of loan also usually involve an appraisal of the property that will secure the loan.
Differences Between a Home Equity Loan and a Mortgage
A mortgage must be used to purchase a specific property — or in some cases to purchase the property and make necessary renovations. There are fewer limitations on the money received from a home equity loan. Some borrowers use funds from a home equity loan or cash-out refi for renovations. Others use the money to pay off higher interest debt or send a child to college.
Mortgage interest can often be deducted if homeowners itemize their deductions. However, you can only deduct interest on a home equity loan if you use the loan to buy, build, or substantially improve your main or second home. So if you want to buy a boat, that deduction won’t hold water. Consult a tax advisor before you count on any type of deduction.
When You Should Consider a Mortgage
If you don’t have the cash to buy a home outright, you will have to finance the purchase with a mortgage. However, there are some considerations you may want to take into account. For example, the larger your down payment, the more equity you will have in your home and the smaller your monthly mortgage payments will be.
Because you have more equity in the home, the lender will see you as less risky. As a result, larger down payments also tend to translate into lower interest rates. So, consider putting down as much as you can afford to.
Also, even if you have the cash to pay for a home in full, you may consider a mortgage anyway. You may not want to tie up cash that could be used for other purposes, such as in an emergency. You may be able to invest that money and earn a return that’s higher than the interest rate you’d pay on the loan.
When You Should Consider a Home Loan
Many people choose to take out home equity loans to make home improvements. That can increase the value of your home, putting you ahead if you ever choose to sell.
You may also consider a home equity loan when consolidating other debt, including high-interest credit card debt. The average interest rate for a home equity loan remains significantly lower than the average credit card rate. As a result, it can make financial sense to pay off the more expensive debt with a new, cheaper loan.
There are times when a HELOC is preferable to a home loan: If you need funds but don’t need a huge sum all at once, or if you aren’t sure exactly how much you might need, you can borrow in increments with a HELOC and only pay interest on the portion of the credit line that you are actively using.
The Takeaway
A mortgage is one type of home loan, but it’s not the only type. There are other ways to borrow money using a home as collateral. A mortgage gets you into a new home, but a home equity loan or HELOC could help you fund a new kitchen or cover another big expense. Whether you’re looking for a mortgage, another type of loan, or a refinance, it’s always a good idea to compare rates and terms.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
Why is a home loan called a mortgage?
“Mortgage” comes from the old French mort gage, meaning a death pledge — a morbid origin for the pledge you make to a lender to pay back the money you borrow.
Is a mortgage cheaper than a home loan?
Mortgages are a type of home loan. Your interest rate will depend on the type and size of your loan, your down payment, and your financial history, such as your credit score.
Can I use a home loan for reasons other than buying a home?
There are some circumstances when a home loan can be used for a reason other than making a purchase. Certain mortgages allow you to buy a home and make renovations to the property. And if you borrow based on your home equity — via a home equity loan, home equity line of credit, or cash-out refinance — you can use the funds for whatever purpose you wish.
Do home loans have lower interest rates than mortgages?
A mortgage is a type of home loan, but there are also other loans, such as home equity loans, that allow you to borrow against the equity you have built up in your home and that use your home as collateral. These loans often have a lower interest rate than an unsecured loan, such as a personal loan, but they typically still have a higher interest rate than a purchase loan. Exactly how rates compare will depend on how much you borrow, your credit score, and other factors.
Are there tax benefits for home loans vs. mortgages?
The potential tax benefits of a mortgage or other type of home loan such as a home equity loan are essentially the same. In 2025, the mortgage interest deduction allows taxpayers who itemize to count interest they pay on a loan related to building, purchasing, or improving a primary home against their taxable income, lowering the taxes they owe. The tax deduction also applies to mortgage interest paid on a residence. Consult a tax advisor to learn how this deduction might apply in your specific situation.
Can I refinance a home loan into a mortgage or vice versa?
A mortgage is a type of home loan, so homeowners who refinance a mortgage typically emerge from the process with a new mortgage. Those who undertake a cash-out refinance get a new mortgage that pays off their first loan and leaves them with a lump sum of cash to use as they wish, such as on a renovation project.
Photo credit: iStock/Brandon Ruckman
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945. All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee. Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Many first-time house hunters lie awake at night worrying, Will I qualify for a mortgage? With the wide variety of loan programs, down payment requirements, and credit thresholds out there, qualifying for a mortgage can feel like a bad choose-your-own-adventure story: “Didn’t prequalify? Return to page 1.”
Let’s take some of the mystery out of how to qualify for a mortgage.
9 Mortgage Qualification Factors
What goes into qualifying for a home loan can be especially confusing. Here are some things that may come into play when qualifying for a home loan.
• A down payment of 18% is typical, though first-time buyers often pay 9%.
• A credit score of 620 is needed for conventional loans, 500 for FHA.
• Income stability is essential, with no set minimum income.
• Debt-to-income ratio should stay below 45% for conventional loans.
• Assets can bolster loan qualification if income is lower.
1. Down Payment
Down payment requirements vary based on the type of home mortgage loan you’re applying for.
Conventional Loan Down Payment
You may have heard that 20% down is the ideal. But in 2024, the median down payment across all homebuyers is 18%, and for first-time homebuyers, it’s 9%, according to research by the National Association of Realtors®. And some conventional loans require just 3% down for first-time homebuyers.
The 20% figure is cited as a goal because putting down 20% helps buyers avoid the added cost of private mortgage insurance (PMI), which is required if your down payment is less than 20%. But you can also avoid PMI by seeking a “piggyback” mortgage or lender-paid mortgage insurance.
If you’re getting help from loved ones for your down payment, you’ll need to document that with a gift letter.
FHA Loan Down Payments
An FHA loan is a government-backed mortgage insured by the Federal Housing Administration. FHA loans are popular with first-time homebuyers. Over 80% of FHA mortgages are issued to first-time buyers each year.
If your credit score is at least 580, you may qualify for a down payment of 3.5% on an FHA loan. (FHA 203(k) loans for fixer-uppers also ask for 3.5% down.) With a score between 500 and 579, you’ll need at least 10% down.
Upfront and annual mortgage insurance is required for FHA loans, usually for the entire term.
USDA Loan Down Payment
A loan insured by the U.S. Department of Agriculture is aimed at moderate-income households that purchase or build in eligible rural areas. Incredibly, no down payment is required. The USDA also directly issues loans to low- and very-low-income buyers in eligible rural areas and provides payment assistance.
USDA loans require an upfront guarantee fee and an annual premium for the life of the loan, but it’s lower than FHA loan mortgage insurance rates.
VA Loan Down Payment
The great perk of VA loans is that no down payment is usually required, but a sizable one-time funding fee is. (You may be exempt from the funding fee if you’re eligible for VA disability compensation for a service-connected disability or meet other conditions.)
Borrowers seeking a conventional loan will likely need a credit score of at least 620. For an FHA loan, applicants with a score as low as 500 may be considered. But 580 is the minimum credit score to qualify for the 3.5% down payment advantage.
A USDA loan usually requires a score of 640; a VA loan, a minimum of 580 to 620. In some cases, you don’t have to have a FICO Score to qualify for a home loan. Fannie Mae’s nontraditional credit program and government loan programs allow for a credit profile to be built based on things like rent payments and utility bills.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
3. Income
Technically, there’s no minimum income required to apply for a mortgage. But your income can limit the amount you’ll qualify for. Lenders also like to see evidence that your income is stable, and will look at an applicant’s last two years of employment. That means you’ll need to provide pay stubs, W-2s or 1099s, and tax returns.
Many types of income count toward a mortgage application: overtime, commissions, bonuses, dividends, Social Security, alimony, and child support. Lenders may ask for documentation (such as a letter from your employer) that such income is expected to continue for the next several years.
Self-employed homebuyers should keep in mind that lenders look at your income after deductions. Taking too many deductions, however deserved, can lower the size of the loan you’ll qualify for.
For some types of loans, there can be upper income limits. Conventional, FHA, and VA loans have no upper limits. But with USDA loans, your income must not exceed 115% of the median income in your area. You can evaluate your eligibility for a USDA loan on the agency’s website.
4. Debt-to-Income Ratio
Typically, your income doesn’t matter as much as your debt-to-income ratio. Your DTI is calculated by dividing your total monthly debt, including your proposed house payment, by your gross monthly income, and is expressed as a percentage.
For example, say you pay $1,500 a month for a mortgage, $100 a month for a car loan, and $400 a month on a student loan. Your total monthly debt comes to $2,000. If you make $6,000 a month before taxes and deductions, your debt-to-income ratio is 33% ($2000 divided by $6000, multiplied by 100).
“If you have multiple debts, you want to make your minimum payments so you don’t hurt your credit score,” Kendall Meade, a Certified Financial Planner at SoFi said. “If you have cash left over after that, you should develop a strategy for which debts to pay off first,” she suggested.
Depending on your credit score, down payment, and cash reserves, your DTI ratio may weigh heavier or lighter in the qualification process.
• Conventional Loan DTI: The maximum DTI for a conventional loan is 45%, but exceptions can be made for strong compensating factors.
• FHA DTI: FHA guidelines allow for a DTI of 43%, but higher ratios are allowed with compensating factors.
• USDA Loan DTI: The USDA usually allows a maximum DTI of 41% but may make exceptions for those with higher credit scores and stable employment.
• VA Loan DTI: VA guidelines call for a maximum DTI of 41%, but lenders set their own limits based on an applicant’s financial health.
Lenders will want to know about any valuable assets you hold. The idea is that these assets can be converted to cash in the event you face financial hardship down the road. Assets can include cash accounts, retirement accounts, stocks and bonds, cars, boats, RVs, jewelry, artwork, and collectibles. You’ll be asked to provide proof of ownership and value, such as appraisal letters.
6. Documentation
Not having the proper documentation in the mortgage loan process can hold things up. As noted above, lenders usually ask for:
• Tax returns from the past two years.
• Two years’ worth of W-2s or year-end pay stubs. If you are self-employed, other evidence of income.
• Child support or divorce documents.
• Bank statements.
• Statements from additional assets.
• Gift letters.
• Photo ID.
• Rental history and contact information.
7. Property Type and Purpose
Up to now, we’ve discussed mortgage qualification factors that are based on the buyer’s financial history. But lenders also consider the purpose of the property you want to buy. A “primary residence,” meaning a home that a buyer purchases with the intention of living in it, will usually qualify for a lower interest rate and better terms than a vacation home or investment property.
The type of home you purchase also makes a difference. Single-family houses secure the best rates. Other types of housing that may incur special fees include condos, co-ops, manufactured houses, log homes, mixed-use developments, and nontraditional architecture. Homes shaped like dinosaurs or flying saucers just make lenders a little nervous.
8. Mortgage Type
The type of mortgage you may want to seek will depend on your credit scores, income, the lender’s loan menu, and more. Government-backed mortgages (FHA, VA, and USDA loans) are acquired through approved lenders, and conventional home loans are issued by a bank, credit union, or other private lender.
• FHA loan: Mortgages backed by the Federal Housing Administration have lower credit requirements than conventional loans. For borrowers with good credit and a medium down payment, a conventional loan may actually be less costly.
• VA loan: Loans insured by the Department of Veterans Affairs are for active-duty service members, veterans, and some surviving spouses. The VA also has a Native American Direct Loan program, which allows Native Americans to buy, build, or improve a home on federal trust land.
• USDA loan: Loans backed by the U.S. Department of Agriculture are for moderate-income buyers who choose a home in a designated rural area. The USDA also offers direct loans for low-income households.
Most mortgages come with a fixed interest rate, but a variable rate can be an option for some conventional loans, as can a variety of mortgage terms or lengths. The fixed-rate 30-year mortgage dominates the U.S. landscape.
One last wrinkle: There are conforming loans and nonconforming loans. By meeting loan limits, a conventional conforming loan is eligible for purchase by Fannie Mae and Freddie Mac. If it isn’t eligible, it’s a nonconforming mortgage — like the government loans or a jumbo loan.
Prequalification is a simpler process. You’ll provide basic information, which can be by phone or online, and a lender will estimate what size loan you might be approved for. No information is verified at this point.
For preapproval, you’re required to give a lender access to your financial history. After reviewing your credit, income, and assets, the lender will offer a loan up to a specific amount. It doesn’t guarantee that you’ll be approved when you formally apply, though.
Prequalification and preapproval can be great ways to dip your toe into the home-buying waters. Then you may apply with more than one lender. Comparing loan estimates can help you determine which option is best for you financially.
Do I Qualify For a Mortgage?
To help you determine how big a home loan you might qualify for, there are a variety of online mortgage calculators to help get you started:
Many factors that can help or hurt your chances of getting approved for a mortgage loan. Your down payment, credit score, income, debt-to-income ratio, assets, documentation, property type and purpose, mortgage type, and prequalification or preapproval status all play a role. Some of these factors can compensate for weaknesses in other areas. For instance, a lower income is less of a problem if you have plenty of valuable assets to draw on. And a high down payment can counter a middling credit score.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
What are the four things you need to qualify for a mortgage loan?
To qualify for a mortgage loan, you’ll need a stable income, strong credit score, modest debt-to-income ratio, and documentation of your employment and assets. Believe it or not, some loan programs do not require a down payment!
What is the lowest income needed to qualify for a mortgage?
There is no minimum income required to apply for a mortgage. However, your income will determine how large a loan you’ll qualify for. Sometimes, your assets can compensate for a lower income. And there are government-backed programs, especially for low-income borrowers.
At what age do you not qualify for a mortgage?
There is no maximum age limit to qualify for a mortgage loan. In fact, lenders legally cannot deny someone a loan term based on their age. For instance, a 70-year-old can still qualify for a 30-year mortgage term.
What do banks check before giving a mortgage?
Just about everything. Banks check your credit history and score, proof of employment and income (W-2s, 1099s, tax returns), your assets (bank statements), your debts (credit card bills), and anything else that will give them a picture of your overall financial health and future prospects.
Do mortgage lenders look at your spending?
Yes, mortgage lenders may look at your bank and credit card statements for the last two years to see whether your spending habits are consistent and where your money goes.
Is everyone eligible for a mortgage?
Pretty much anyone who can afford to carry a mortgage can qualify for one. However, it’s possible that someone who earns money under the table or holds their assets in offshore accounts wouldn’t be able to document their financial qualifications to satisfy a lender.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
A jumbo loan is a home mortgage loan that exceeds maximum dollar limits set by the Federal Housing Finance Agency (FHFA). Loans that fall within the limit are called conforming loans. Loans that exceed them are jumbo loans.
Jumbo mortgages may be needed by buyers in areas where housing is expensive, and they’re also popular among lovers of high-end homes, investors, and vacation home seekers.
What Is a Jumbo Loan?
To understand jumbo home loans, it first helps to understand the function of Freddie Mac and Fannie Mae. Neither government-sponsored enterprise actually creates mortgages; they purchase them from lenders and repackage them into mortgage-backed securities for investors, giving lenders needed liquidity.
Each year the FHFA sets a maximum value for loans that Freddie and Fannie will buy from lenders — the so-called conforming loans.
Jumbo Loans vs Conforming Loans
Because jumbo home loans don’t meet Freddie and Fannie’s criteria for acquisition, they are referred to as nonconforming loans. Nonconforming, or jumbo, loans usually have stricter requirements because they carry a higher risk for the lender.
Jumbo Loan Limits
So how large does a loan have to be to be considered jumbo? In most counties, the conforming loan limits for 2023 are:
• $726,200 for a single-family home
• $929,850 for a two-unit property
• $1,123,900 for a three-unit property
• $1,396,800 for a four-unit property
The limit is higher in pricey areas. For 2023, the conforming loan limits in those areas are:
• $1,089,300 for one unit
• $1,394,775 for two units
• $1,685,850 for three units
• $2,095,200 for four units
Given rising home values in many cities, a jumbo loan may be necessary to buy a home. Teton County, Wyoming, for instance, has an average home value of $1,624,087 and a conforming loan limit of $1,089,300.
Approval for a jumbo mortgage loan depends on factors such as your income, debt, savings, credit history, employment status, and the property you intend to buy. The standards can be tougher for jumbo loans than conforming loans.
The lender may be underwriting the loan manually, meaning it’s likely to require much more detailed financial documentation — especially since standards grew more stringent after the 2007 housing market implosion and during the pandemic.
Lenders generally set their own terms for a jumbo mortgage, and the landscape for loan requirements is always changing, but here are a few examples of potential heightened requirements for jumbo loans.
• Your debt-to-income (DTI) ratio. This ratio compares your total monthly debt payments and your gross monthly income. The figure helps lenders understand how much disposable income you have and whether they can feel confident you’ll be able to afford adding a new loan to the mix.
To qualify for most mortgages, you need a DTI ratio no higher than 43%. In certain loan scenarios, lenders sometimes want to see an even lower DTI ratio for a jumbo loan, or they may counter with less favorable loan terms for a higher DTI.
• Your credit score. This number, which ranges from 300 to 850, helps lenders get a snapshot of your credit history. The score is based on your payment history, the percentage of available credit you’re using, how often you open and close accounts such as credit cards, and the average age of your accounts.
To qualify for a jumbo loan, some lenders require a minimum score of 700 to 740 for a primary home, or up to 760 for other property types. Keep in mind that a lower score doesn’t mean you won’t be able to get a jumbo loan. The decision depends on the lender and other factors, such as the loan program requirements, your debt, down payment amount, and reserves.
• Down payment. Conforming mortgages generally require a 20% down payment if you want to avoid paying private mortgage insurance (PMI), which helps protect the lender from the risk of default.
Historically, some lenders required even higher down payments for jumbo mortgages, but that’s not necessarily the case anymore. Typically, you’ll need to put at least 20% down, although there are exceptions.
A VA loan can be used for jumbo loans. The Department of Veterans Affairs will insure the part of the loan that falls under conforming loan limits. The down payment requirement is based on the portion of the jumbo loan that’s above the conforming loan limit. The loan is available from some lenders with nothing down and no PMI. VA loans have a one-time “funding fee,” though, a percentage of the amount being borrowed.
• Your savings. Jumbo loan programs often require mortgage reserves, housing costs borrowers can cover with their savings. The number of months of PITI house payments (principal, interest, taxes, insurance), plus any PMI or homeowner association fees, needed in reserves after loan closing depends on many factors. For a jumbo loan, some lenders may require reserves of three to 24 months of housing payments.
You don’t necessarily need to have all the money in cash. Part of mortgage reserves can take the form of a 401(k), stock portfolios, mutual funds, money market accounts, and simplified employee pension accounts.
Also, depending on the loan program, a lender may be comfortable with lower cash reserves if you have a high credit score, low DTI ratio, a high down payment, or some combination of these things.
• Documentation. Lenders want a complete financial picture for any potential borrower, and jumbo loan seekers are no exception. Most lenders operate under the “ability to repay” rule, which means they must make a reasonable, good-faith determination of the consumer’s ability to repay the loan according to their terms. Applicants should expect lenders to vet their creditworthiness, income, and assets.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
Jumbo Loan Rates
You might assume that interest rates for jumbo loans are higher than for conforming loans since the lender is putting more money on the line.
But jumbo mortgage rates fluctuate with market conditions. Jumbo mortgage rates can be similar to those of other mortgages, but sometimes they are lower.
Because the absolute dollar figure of the loan is higher than a conforming loan, it is reasonable to expect closing costs to be higher. Some closing costs are fixed, such as a loan processing fee, but others, such as title insurance, are tiered based on the purchase price or loan amount.
Pros and Cons of Jumbo Loans
Benefits
Because a jumbo loan is for an amount greater than a conforming loan, it gives you more options for ownership of homes that are otherwise cost-prohibitive. You can use a jumbo loan to purchase all kinds of residences, from your main home to a vacation getaway to an investment property.
Drawbacks
Due to their more stringent requirements, jumbo loans may be more accessible for borrowers with higher incomes, strong credit scores, modest DTI ratios, and plentiful reserves.
However, don’t assume that jumbo loans are just for the rich. Lenders offer these loans to borrowers with a wide variety of income levels and credit scores.
Lender requirements vary, so if you’re seeking a jumbo loan, you may want to shop around to see what terms and interest rates are available.
The most important factor, as with any loan, is that you are confident in your ability to make the mortgage payments in full and on time in the long term.
How to Qualify for a Jumbo Loan
To qualify for a jumbo loan, borrowers need to meet certain jumbo loan requirements. You’ll likely need to show a prospective lender two years of tax returns, pay stubs, and statements for bank and possibly investment accounts. The lender may require an appraisal of the property to ensure they are only lending what the home is worth.
Is a Jumbo Loan Right for You?
You’ll need to come up with a large down payment on a property that merits a jumbo loan, and some of your closing costs will be higher than for a conventional loan. But depending on where you wish to buy, the cost of the property, and the amount you wish to borrow, a jumbo loan may be your only choice for a home mortgage loan. It’s a particularly attractive option if you have good credit, a low DTI, and a robust savings account. And sometimes jumbo home loans actually have lower interest rates than other loans.
What About Refinancing a Jumbo Loan?
After you’ve gone through the mortgage and homebuying process, it could be helpful to have information about refinancing. Some borrowers choose to refinance in order to secure a lower interest rate or more preferable loan terms.
This could be worth considering if your personal situation or mortgage interest rates have improved.
Refinancing a jumbo mortgage to a lower rate could result in substantial savings. Since the initial sum is so large, even a change of just 1 percentage point could be impactful.
Refinancing could also result in improved loan terms. For example, if you have an adjustable-rate mortgage and worry about fluctuating rates, you could refinance the loan to a fixed-rate home loan.
The conforming loan limits set by the Federal Housing Finance Agency can vary based on the county where you are buying a home.
In most areas of the country, the conforming loan limit for a one-unit property increased to $726,200 in 2023 (the amount rises for multiunit properties). The chart below shows exceptions to the $726,200 limit by state and county.
State
County
2023 limit for a single unit
Alaska
All
$1,089,300
California
Los Angeles County, San Benito, Santa Clara, Alameda, Contra Costa, Marin, Orange, San Francisco, San Mateo, Santa Cruz
$1,089,300
California
Napa
$1,017,750
California
Monterey
$915,400
California
San Diego
$977,500
California
Santa Barbara
$805,000
California
San Luis Obisbo
$911,950
California
Sonoma
$861,350
California
Ventura
$948,750
California
Yolo
$763,600
Colorado
Eagle
$1,075,250
Colorado
Garfield
$948,750
Colorado
Pitkin
$948,750
Colorado
San Miguel
$862,500
Colorado
Boulder
$856,750
Florida
Monroe
$874,000
Guam
All
$1,089,300
Hawaii
All
$1,089,300
Idaho
Teton
$1,089,300
Maryland
Calvert, Charles, Frederick, Montgomery, Prince George’s County
Bronx, Kings, Nassau, New York, Putnam, Queens, Richmond, Rockland, Suffolk, Westchester
$1,089,300
New York
Dutchess, Orange
$726,525
Pennsylvania
Pike
$1,089,300
Utah
Summit, Wasatch
$1,089,300
Utah
Box Elder, Davis, Morgan, Weber
$744,050
Virgin Islands
All
$1,089,300
Virginia
Arlington, Clarke, Culpeper, Fairfax, Fauguier, Loudon, Madison, Prince William, Rappahannock, Spotsylvania, Stafford, Warren, Alexandria, Fairfax City, Falls Church City, Fredericksburg City, Manassas City, Manassas Park City
$1,089,300
Washington
King, Pierce, Snohomish
$977,500
Washington D.C.
District of Columbia
$1,089,300
West Virginia
Jefferson County
$1,089,300
Wyoming
Teton
$1,089,300
Source: Federal Housing Finance Agency
The Takeaway
What’s the skinny on jumbo loans? They’re essential for buyers of more costly properties because they exceed government limits for conforming loans. Luxury-home buyers and house hunters in expensive counties may turn to these loans, but they’ll have to clear the higher hurdles involved.
If you’re interested in refinancing a jumbo mortgage at competitive rates, consider SoFi. You can prequalify online and put as little as 10% down.
Jumbo loans typically require a credit score of at least 700, a low DTI, and a down payment of at least 20%, although there are always exceptions.
What is the difference between a jumbo loan and a regular loan?
A jumbo loan is a home mortgage loan that exceeds maximum dollar limits set by the Federal Housing Finance Agency. Jumbo loans are typically used by buyers in regions with higher-priced housing but are also popular among luxury homebuyers and investors.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Jumbo loans are just that: jumbo. For 2023, conforming loan limits for houses in most counties — set by the Federal Housing Finance Agency — are $726,200. If you want to buy a more expensive home and need to finance more than that limit, you’ll be in the market for a jumbo loan.
Homeowners often refinance traditional (i.e., conforming) mortgages to get a lower interest rate, change their loan terms, or tap into home equity. But what about homeowners with a jumbo loan: Can they refinance as well?
A mortgage refinance for a jumbo loan is possible, but it may be a little more complicated. Let’s have a look at the process of a jumbo loan refinance.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
When Can You Refinance a Jumbo Loan?
There is no set timeline for refinancing a jumbo mortgage loan. In theory, you could refinance at any point during your loan, but lenders typically have strict requirements before approving a jumbo mortgage refinance. If you’ve been paying down the loan for a while, it’s possible your refinance would fall within the conforming loan limits. To determine whether or not this is the case, take a look at the conforming loan limits for your specific area. If you still need a jumbo mortgage loan, this is what you’ll want to consider:
Credit Score
Unsurprisingly, getting approved for a jumbo refinance means you’ll need a strong credit score. To refinance to a 30-year fixed-rate loan, lenders typically want to see a credit score of 680 or higher. Refinancing to a 15-year fixed or adjustable-rate mortgage has an even tougher credit score threshold: 700 or higher. And if you’re looking for a refinance for an investment or rental property, you may need a credit score as high as 760.
Similarly, lenders will analyze your debt-to-income (DTI) ratio when reviewing your jumbo refinance application. While lenders typically want a DTI of 50% or lower for conventional loans, you may need a DTI as low as 36% when refinancing a jumbo mortgage loan.
Cash Reserves
Lenders will also typically want to see that you have cash reserves set aside. The amount of mortgage reserves you need will vary by lender but could be as much as six months’ worth of mortgage payments in liquid assets, more if you are self-employed.
Other Considerations
In addition, lenders may consider your payment history. If you have made one or more late payments on your current jumbo mortgage loan, you might not get approved for a refinance.
Other lenders may want you to have a certain amount of equity in your home before permitting a refinance.
And if you’ve filed for bankruptcy, it can be much more challenging to refinance. You’ll usually need to wait until the bankruptcy (or a past foreclosure) vanishes from your credit history — potentially 10 years.
💡 Quick Tip: If you refinance your mortgage and shorten your loan term, you could save a substantial amount in interest over the lifetime of the loan.
Jumbo Loan Refinance Requirements
Assuming you have the right qualifications for a jumbo refinance, here’s what you’ll typically need to provide to the lender:
• Two previous months of bank statements
• Proof of income, like your most recent pay stub
• Tax returns from the last two years, including all W-2s
• A profit/loss and balance sheet if you’re self-employed
• Any other documentation of income, such as 1099s, that can help your chances of approval
Of course you’ll also have to go through all the steps of refinancing a mortgage that would be required with any loan.
💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.
Pros and Cons of Refinancing a Jumbo Loan
As with regular refinancing, jumbo mortgage refinances have a number of pros and cons to consider:
Pros
• Faster payoff: If you refinance to a mortgage with a shorter term, you’ll pay off your home sooner — and be free from that high monthly payment.
• Less interest: If you get a lower interest rate, you could save money over the life of the loan.
• Predictable payments: If you switch from an adjustable-rate mortgage to a fixed-rate loan, your monthly payments will be locked in.
• Home improvements: If you do a jumbo cash-out refi, you can leverage the equity you have in your home to make home improvements. You could also use the money to pay down debt or cover college costs.
Cons
• Closing costs: Refinancing a home loan means you’ll have to close again, and that can get expensive. According to Freddie Mac, closing costs when refinancing average about $5,000.
• Larger monthly payments: If you shorten your loan term when refinancing, be prepared for larger monthly payments. You’ll want to feel confident that if you face a job loss, have a new baby, or experience another big life change you can still afford the higher monthly payment.
• Lost equity: With a cash-out refinance, you borrow against the equity in your home. While it’s helpful for funding home improvements or paying down high-interest debt, you lose out on that equity you’ve built.
How Will Refinancing a Jumbo Loan Affect Your Mortgage?
Refinancing a jumbo loan can have a few intended effects, including:
Lower Rate
Mortgage rates fluctuate over time. If rates drop, you might want to refinance to take advantage of the lower interest rate.
Longer Loan Term
If your current monthly mortgage payment is too high for you to handle, you may be able to lower it by refinancing and lengthening the loan term. Keep in mind, you’ll likely pay more in interest over the life of the loan — but the tradeoff for lower monthly payments might be worth it.
Shorter Loan Term
On the flip side, you might be able to shorten the length of your loan by refinancing. Your monthly payments may go up, but you’ll likely pay less in interest, and you’ll be free from the burden of a mortgage payment significantly sooner.
Take Cash Out of Equity
Many homeowners do a cash-out refinance to take advantage of some of the equity they’ve built in their home. You might refinance to get a nice lump sum to put toward home renovations, high-interest credit card debt, or another big expense.
Change Interest Structure
If your jumbo loan is an adjustable-rate mortgage, you may have trouble predicting your monthly payments. When you refinance to a fixed-rate loan, you’ll get more dependable monthly payments, which can make it easier to budget.
The Takeaway
Refinancing a jumbo mortgage is possible and could yield several benefits, like a better interest rate, better terms, and a better interest structure. The requirements to refinance your jumbo loan may be stricter than refinancing a conforming loan. Work with a lender to understand when and how you can refinance your jumbo loan.
When you’re ready to take the next step, consider what SoFi Home Loans have to offer. Jumbo loans are offered with competitive interest rates, no private mortgage insurance, and down payments as low as 10%.
SoFi Mortgage Loans: We make the home loan process smart and simple.
FAQ
Can I refinance my jumbo mortgage loan with my current lender?
It may be possible to refinance your jumbo mortgage loan with your current lender. But refinancing is also a time to shop around and consider the terms other lenders have to offer. With any jumbo loan refinance, you’ll need to meet certain requirements; this might include a minimum credit score or DTI.
What are the risks associated with refinancing a jumbo mortgage loan?
Refinancing a jumbo mortgage will involve significant closing costs. Your credit score will also likely drop when you refinance because of the hard inquiry. And if it’s a cash-out refinance, you’ll lose some of the equity you’ve built in your home.
How often can I refinance my jumbo mortgage loan?
While there’s technically no limit to how often you can refinance a mortgage loan, you likely won’t want to do it too often. You’ll pay closing costs every time you refinance, and your credit score can take a hit each time.
Can I still refinance my jumbo mortgage loan if I’m self-employed?
It’s possible to refinance a jumbo mortgage loan if you’re self-employed. You may just have to jump through additional hoops to prove your income. That can mean providing a profit-and-loss and balance statement, tax returns or 1099s from recent years, and business bank statements.
Can I refinance my jumbo mortgage loan if I have an adjustable-rate loan?
Yes, you can refinance your jumbo mortgage if you have an adjustable-rate loan. One of the many reasons people consider refinancing a jumbo loan is to switch from an adjustable- to a fixed-rate mortgage.
What should I do if I’m having trouble making payments on my jumbo mortgage loan?
If you’re having trouble making payments on your jumbo mortgage loan, you may be able to refinance to get a better interest rate/and or lengthen the loan term. Both options could lower your monthly payment. However, if you’ve already missed one or more payments, getting approved for a jumbo refinance could be challenging.
How do I know if refinancing my jumbo mortgage loan is the right decision for me?
To determine if refinancing a jumbo mortgage loan is right for you, consider your current finances and long-term goals. If refinancing means your monthly payments will be more manageable, you’ll save money in the long term, or you’ll be able to leverage your equity to fund a home renovation or pay down high-interest debt, it may be a good strategy for you.
Photo credit: iStock/FG Trade
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
