What Are the Current Jumbo Mortgage Rates?

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Homebuyers look at mortgage rates to help them decide whether it’s the right time to buy a home, and if so, how much they can afford to spend. When they plan to finance the home with a jumbo loan, having a favorable rate is a top priority because of the amount of money they’ll borrow.

What Are the Current Jumbo Mortgage Rates?

The 30-year Fixed Rate Jumbo Mortgage Index is 7.05% as of Nov. 19, according to the Federal Reserve Bank of St. Louis. The index, from Optimal Blue Mortgage Market Indices, is based on locked-in rates from more than one-third of mortgage transactions in the U.S.

Zillow’s 30-year average jumbo mortgage rate, based on quotes from lenders on its website, is 6.68%, down 0.08% from a week ago.

What Is a Jumbo Mortgage?

A jumbo mortgage is a type of conventional loan, meaning it’s not backed by the federal government. However, unlike standard conventional mortgages — called “conforming” loans because they adhere to loan limits set by the Federal Housing Finance Agency — a jumbo loan exceeds those limits and is classified as non-conforming.

What Is the Jumbo Loan Limit for 2024?

The 2024 FHFA loan limit for a single-family home is $766,550 in most of the U.S., and $1,149,825 in high-priced areas like Alaska and Hawaii. So, if you take out a jumbo loan, you’ll borrow more than $766,550, or more than $1,149,825 in Alaska or Hawaii.

What Is a 30-Year Jumbo Mortgage?

A 30-year jumbo mortgage is a jumbo mortgage loan with a term of 30 years. You repay the loan in 360 equal monthly payments.

Is a $600,000 Loan a Jumbo Loan?

No. A $600,000 loan falls well below the conforming limit of $766,550, so it’s a conforming loan.

How Does Jumbo Mortgage Loan Interest Work?

Lenders set their own mortgage interest rates regardless of the type of mortgage loan, and they base rates on many different factors. Those factors include economic conditions, the housing market and federal interest rates as well as borrower qualifications.

Here are some characteristics that give lenders clues about how likely (or unlikely) you are to default on your mortgage loan:

• Your credit score
• Down payment amount
• Debt-to-income ratio
• Your loan type, amount and term

A higher likelihood means higher interest rates.

The lender applies the rate to the loan principal, which is the amount you borrow. Exactly how it does that depends on the type of jumbo loan you have.

Fixed-Rate Jumbo Loans

A typical 15- or 30-year fixed-rate jumbo loan is fully amortizing, which means your scheduled monthly payments will pay off the entire principal and all the interest that has accrued.

To achieve that, the lender creates an amortization schedule that determines how much of each payment goes toward principal and how much goes toward interest. At first, most of the payment goes toward interest. Over time, as the principal gradually declines, that balance shifts. The last payment is mostly principal, plus the small amount of interest due on it.

Adjustable-Rate Jumbo Loans

Adjustable-rate jumbo loans can also fully amortize, but their rates change over time, according to market conditions.

A jumbo ARM starts with a fixed rate, usually for five or seven years. Following the fixed-rate period, the rate adjusts periodically, according to a predetermined schedule like six months or one year. Jumbo mortgage rates can go up or down with each adjustment, although most ARMs cap how much they can change with each adjustment and over the entire life of the loan.

The rate adjustments are based on a benchmark rate to which the lender adds a margin. If the benchmark is 5.5% and the lender adds a 2.5% margin, the ARM rate will adjust to 8%. Every time the rate changes, so does the mortgage payment.

ARMS can also be interest-only, where you only pay interest during the initial fixed-rate period. After that, you pay principal and interest for the remainder of the loan term.

Balloon Jumbo Loan

Balloon loans are shorter-term non-amortizing loans where you make payments for several years — seven, for example. At the end of the seven years, you make a large, lump-sum payment to pay off the remaining principal and any interest that has accrued.

How Do Jumbo Loans and Conforming Loans Differ?

Jumbo loans and conforming loans differ primarily in how they are handled by Fannie Mae and Freddie Mac, the government-sponsored entities that purchase most conforming loans. These entities bundle conforming loans into securities, providing lenders with the funds to issue more loans. To manage risk, they impose loan limits and require borrowers to meet specific eligibility criteria for conforming loans.

From the borrower’s perspective, the most notable difference between jumbo loans and conforming loans is the borrowing limit. Here are some key points:

• Conforming loans typically allow homebuyers to borrow up to $766,550 for their purchase.
• Jumbo loans, on the other hand, are limited only by the lender’s credit and income requirements as well as the specific loan limits.
• For instance, Rocket Mortgage offers jumbo loans up to $2.5 million.
• Similarly, Chase provides jumbo loan options that can go as high as $9.5 million.

The large loan amounts and lack of guarantees by Fannie Mae or Freddie Mac make jumbo loans riskier for lenders. They manage that extra risk by raising the bar on borrower qualifications and by charging borrowers higher interest rates.

How Do Jumbo Loan Rates Compare to Conforming Loan Rates?

The size of a jumbo loan and its lack of backing from government-sponsored enterprises often result in slightly higher interest rates compared to conforming loans — at least for fixed-rate options. Here’s a comparison of rates as of Nov. 19, based on Zillow’s published data:

Fixed Rate Loans

• 30-year conforming loan: 6.59% APY
• 15-year conforming loan: 5.93% APY
• 30-year jumbo loan: 6.68% APY
• 15-year jumbo loan: 6.54% APY

However, for adjustable-rate mortgages, the trend reverses, with jumbo loans often having lower rates than conforming loans:

Adjustable-Rate Loans

• 7-year conforming ARM: 7.18% APY
• 7-year jumbo ARM: 6.74% APY
• 5-year conforming ARM: 7.15% APY
• 5-year jumbo ARM: 6.76% APY

How Do You Qualify for a Jumbo Mortgage Loan?

Jumbo loans don’t have to meet Fannie Mae and Freddie Mac standards, but lenders impose their own. And they can be quite strict because of the size of a jumbo loan and the amount of risk it poses to the lender.

Here are the minimum requirements you can expect.

• Credit score: Whereas you can qualify for a conforming loan with a 620 credit score, albeit not at the best rate, you’ll need at least a 680 score to qualify for a jumbo loan. Some lenders want to see a score of 720 or better, according to Experian.
• Debt-to-income ratio: Some lenders, including Rocket Mortgage, will approve jumbo loans with a debt-to-income ratio of 45%; others require 43% or less.
• Loan-to-value ratio: The maximum LTV determines the down payment you need to qualify for the loan. That ratio is 75% at Rocket Mortgage, which means you’ll need 25% down. Other lenders advise borrowers to be prepared for an LTV as low as 70%, which would require a 30% down payment, but some lenders allow a 90% LTV, or 10% down.
• Cash reserves: You’ll need cash reserves covering at least six months’ worth of mortgage payments to qualify for a jumbo loan, but some lenders require 12 or 18 months’ reserves.

Pros and Cons of Jumbo Mortgage Loans

A jumbo mortgage loan is a long-term commitment that can have a profound impact on your finances. Weigh the pros and cons before you apply.

Pros

• Jumbo loans give well-qualified borrowers access to high-end homes and homes in high-cost areas.
• Lenders set their own criteria for approval.
• Rates can be competitive with rates on conforming loans.

Cons

• Jumbo loans usually have strict eligibility criteria.
• Although jumbo loan rates are often similar to conforming loans, even a small difference of a few tenths of a percent can significantly increase the total interest paid over the life of a large loan.
• Jumbo loans often require a significant outlay of cash for the down payment and closing costs.

Alternative to a Jumbo Mortgage Loan

If you’re purchasing a home in a designated high-cost area, you might be able to use a “super conforming” loan instead of a jumbo loan to finance your purchase.

A super conforming loan has a minimum loan amount of $766,551 and a maximum of $1,149,825 in the contiguous 48 states. This exceeds the $766,550 conforming limit for single-family homes but falls within the high-cost-area limit of $1,149,825.

This type of loan is offered by Fannie Mae and Freddie Mac, so you have to meet their eligibility standards. But there are no special criteria for super conforming loans vs. conforming loans, according to Freddie Mac.

Whether this is a better option than a jumbo loan depends on your situation. If your loan amount falls within the super conforming limit, and your purchase will stretch your budget, the super conforming loan might be best because you can qualify with as little as 5% down. In addition, you can have a credit score as low as 620. But keep in mind that the ability to meet only minimal requirements puts you at a higher risk of default.

Final Take

Consider whether you might be better off saving up additional down payment and reserve money and boosting your credit score so that you qualify for a jumbo loan. The rate will likely be similar, and you’ll start off with more equity and a more secure financial position.

Gabrielle Olya contributed to the reporting for this article.

Data is accurate as of Nov. 19, 2024, and is subject to change.

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