Do I need a Jumbo Loan? What are conforming limits and where can I look them up?

How do you know if you need a jumbo loan? Start by finding the loan limits for your area. Don’t know what loan limits are or where to find them? We can help. But first, let’s take a minute to review what jumbo loans are and how they work:

What is a Jumbo Loan?

A jumbo loan is a special type of mortgage that allows home buyers to finance the purchase of a home that does not meet the standards of a conforming loan, particularly the size. While most places across the U.S. have conforming loan limits of $417,000, not all homes are priced below that figure. For homes that are priced beyond the conforming limit, a jumbo mortgage is needed.

Lenders who offer jumbo loans do so knowing that the loans don’t conform to the standards set forth by Fannie Mae and Freddie Mac, which means they will be harder to sell on the secondary market. This makes them a higher risk product, and therefore they cost more to insure. The lender will usually offset this risk by charging a higher mortgage rate to the borrower.

This is why jumbo loans are expensive – both in principal and interest. However, for some home buyers, a jumbo loan is their only option.

[Related Post: What is the difference between conforming and non-conforming loans?]

What are Loan Limits?

Loan limits essentially are limits on the amount of money banks and lenders can lend out while still conforming to the government’s standards. Fannie Mae and Freddie Mac are the two major government sponsored enterprises that set these limits.

If a mortgage is higher than the loan limit set for the area in which the home is located, then a jumbo loan will most likely be required.

Where Can I Find My County’s Loan Limit?

Throughout most of the United States, the conforming loan limit is $417,000 – however, the limits are different in certain counties that are considered high cost. For example, every county in Alaska has a loan limit of $625,500 because it is a much more expensive state to live in. Likewise, counties in Hawaii have limits that range from $625,500 to $721,050.

To find the conforming loan limit for your county, you can look it up on this PDF table.

You can also talk to your mortgage lender and he or she will be able to look up your county’s loan limit for you. If you’re not working with a lender yet, please keep Luxury Mortgage in mind for your non-conforming loan needs. We specialize in residential mortgages and can serve borrowers in multiple states across the country. We provide personalized service, a variety of loan options, and when you reach out to us, you’ll receive a no-obligation rate quote.