What is a Jumbo Loan?

A jumbo loan is a mortgage that exceeds specific dollar amounts set by the Federal Housing Finance Agency. What’s considered a jumbo mortgage depends on where the property is located. For most places in the U.S., a mortgage on a 1-unit property is considered a jumbo loan if it exceeds $417,000. However, in places like Hawaii and in certain high-cost counties, jumbo loans may have even higher limits. For example, in San Francisco county, a loan is only considered “jumbo” if it exceeds $625,500 (even though the median house price is much higher than that).

Most lenders offer both fixed-rate and variable-rate jumbo loans.

Why do jumbo loans matter?

The main reason that jumbo loans even matter is because many lenders treat jumbo mortgages differently from non-jumbo loans (also called conforming loans). Compared to conforming loans, jumbo loans may have different:

• Interest rates
• Underwriting and credit guidelines
• Minimum down payment requirements
• Reserve requirements

All else being equal, this means that it may be harder to qualify for a jumbo loan from some lenders.

What about jumbo loans at SoFi?

With SoFi, there’s no such thing as a “jumbo loan.” We offer the same great rates and experience no matter how much or how little you need to borrow. Our goal is to accelerate your success.

• SoFi offers 15-year fixed-rate, 30-year fixed-rate, and 7/1 adjustable-rate mortgages on primary residence or second homes
  If you’re shopping for a home, SoFi lets you put as little as 10% down with no PMI on loans up to $3 million.
• If you’re refinancing, you can cash out up to 65% of your property’s value
  SoFi doesn’t charge any application, origination, or lender fees.

What does LTV (loan-to-value ratio) mean in real estate or for mortgages?

The LTV (loan-to-value ratio) of a home is a way to compare the loan amount on a property with the property’s value. Lenders commonly use LTV to determine what interest rates they’re willing to offer you.

How is LTV calculated?

To calculate LTV, just divide your loan balance by your property’s value. For example:

• Imagine you put 10% down on a $100,000 house
• Since you’re putting down $10,000, you would need a loan amount of $90,000 on a house valued at $100,000
• Dividing $90,000 by $100,000 would give you a LTV of 0.90 or 90%.

Why does LTV matter?

Generally speaking, borrowers with lower LTVs will qualify for lower rates. This is true whether you’re buying a house or whether you’re refinancing your home.

Lenders tend to charge higher rates when they think there’s more risk, and borrowers who have lower LTVs are perceived to be less risky loans because they have a higher percentage of equity in their house.

If you’re buying a home and have over an 80 LTV ratio (i.e., if you are putting less than 20% down), many lenders will require that you carry and pay for private mortgage insurance (PMI) in addition to your monthly principal and interest payments.

How do I change my LTV?

Since the LTV ratio depends only on loan amount and property value, your LTV will change whenever the loan amount changes or when the property value changes. So your LTV will get lower when you pay down your mortgage or when your property appreciates in value.

Here are some example scenerios:

Example A:   Loan pay down without home appreciation

• Years ago, John bought and put 20% down on a $100,000 home.
• With an initial loan amount of $80,000, John’s starting LTV is $80,000 / $100,000 = 0.80 (or 80%).
• Even though the house hasn’t appreciated in value (it’s stayed at $100,000), John has been paying his loan regularly and now only has $50,000 of principal left to pay on his mortgage.
• Since his loan balance is now $50,000, his LTV is now $50,000 / $100,000 = 0.50 or 50%.

Example B:   Loan pay down with home appreciation

• Let’s assume the same situation as above, but now John’s home has appreciated from $100,000 to $200,000 during the same period
• With $50,000 left on his mortgage, John’s LTV today would be $50,000 / $200,000 which is 0.25 (or 25%), which is much lower than the 0.50 (or 50%) from before.

Check out the SoFi difference

Whether you’re refinancing or buying, SoFi offers competitive rates across a range of LTVs. Put as little as 10% down, or refinance to new terms or rates. Either way, you’ll enjoy competitive rates with a fast and easy application.