Jumbo Mortgage Limits in 2021
If you have your sights on an expensive home – or the average home in an expensive area – a traditional mortgage may not be enough. A jumbo loan might be the answer, but you may need higher credit ratings and greater cash reserves, among other things, to qualify.
Do you need a jumbo loan? You can do this if the amount you want to borrow exceeds the last compliant credit limits of the Federal Housing Finance Agency.
A jumbo loan is a type of mortgage that is too high to get through , which are government sponsored companies that set mortgage loan standards and buy qualified loans from lenders. Loans that can be purchased from Fannie Mae or Freddie Mac – also known as “compliant loans” – are considered safer investments by lenders than jumbo loans, and it can be easier for borrowers to meet their requirements.
As home prices rise in most areas of the United States, the FHFA has increased compliant credit limits for 2021. How much a loan can be before it is considered “jumbo” depends on where you live, as certain more expensive areas – such as Hawaii or San Francisco – have higher limits. If you are concerned about meeting the more stringent lender criteria for jumbo loan approval, these new limits allow you to finance a high-priced home with a traditional loan instead.
The following limits apply to compliant loans in 2021:
The exact compliant credit limits for your region can be found using the tool below.
If the amount you want to borrow exceeds the limits of a compliant loan and you get one , your lender may require:
The ceilings set by the Housing and Economic Recovery Act of 2008, as well as the rules for adjusting the limit, should ensure that the loans enabled by Fannie Mae or Freddie Mac are widely available.
The values of the jumbo loans exceed these limits, making them non-compliant loans. Lenders consider bad loans riskier because Fannie and Freddie don’t guarantee them. When a borrower stops making payments and the jumbo loan goes bad, lenders know they are on the hook for a large portion of the bill.
As for the caps on jumbo loans, it is up to the lender. Once you are in the non-compliant mortgage area, you can borrow as much as your lender approves of the loan.
Finding the right lender requires a little homework. Start with NerdWallet’s tips for the tip . You can also to determine if now is the best time to start the pre-approval process.