Super Jumbo Mortgage Loans: A Comprehensive Guide

Super jumbo mortgage loans are available for borrowers who need to finance a property purchase or refinance with a loan amount exceeding $1 million. These loans are typically offered by high-end lenders and are tailored to meet the unique needs of affluent borrowers.

The minimum down payment for a super jumbo mortgage loan can be as low as 10% to 20% of the loan amount, although 20% or more is often recommended to avoid paying private mortgage insurance (PMI). Borrowers with a higher credit score and a stable income may qualify for better loan terms.

Super jumbo mortgage loans often have higher interest rates compared to conventional mortgage loans, but some lenders may offer competitive rates for borrowers with excellent credit and a strong financial profile. Borrowers should carefully review their loan options and consider factors such as loan terms, interest rates, and fees when choosing a super jumbo mortgage loan.

A super jumbo mortgage is a type of loan that exceeds the conforming loan limit for a particular county.

Fannie Mae and Freddie Mac, government-sponsored enterprises, have limits on the size of residential mortgages they package into securities, which are known as conforming loan limits.

In California, the conforming loan limit is $5 million, but with a super jumbo mortgage, you can borrow up to $5 million, making it a great option for high-end home buyers.

To qualify for a super jumbo mortgage, you'll typically need a great credit score, a significant down payment, and proof of substantial financial assets.

In Washington State, a super jumbo mortgage is generally considered a loan that exceeds $1 million, but the exact limit can vary depending on the county.

Here are some key characteristics of super jumbo mortgages:

Lenders exercise increased caution when approving super jumbo mortgages, so be prepared to provide detailed financial information and documentation.

Interest rates on super jumbo mortgages can be significantly higher than conforming mortgage rates, and the spread can be as much as a percent or two for loans above $1.5 million.

Loans can be structured as fixed-rate mortgages, ARM loans, hybrid loans, or even negative amortizing option ARMs, giving you flexibility in your loan options.

Maintenance and property taxes are also major considerations for owners of expensive homes, with some properties requiring payments of over $500,000 per year.

Super Jumbo Mortgages present a significant risk to lenders, with increased risk in direct correlation with the size of the loan. The lack of "agency" support for these loans reduces the available pool of investors and insurers, making it harder for lenders to secure funding.

Mortgages over $1 million have an even smaller secondary market of investors, and super jumbo mortgages over $2 million often require extensive "sourcing" of private investors prior to funding. This complex nature of funding these loans requires the use of Super Jumbo mortgage specialists, whose compensation requirements are generally too prohibitive for retail banks and mass market lenders.

To mitigate these risks, lenders use a few common strategies in super jumbo mortgage underwriting.

Risks for lenders are substantial with Super Jumbo Mortgages, which present a higher risk than conforming mortgages due to the lack of "agency" support.

The lack of agency support reduces the available pool of investors and insurers for jumbo mortgages by an order of magnitude. This makes it difficult for lenders to secure funding for these loans.

Mortgages in excess of $1 million have an even smaller secondary market of investors, making it hard for lenders to sell these loans on the market.

Securitization of Super Jumbo Mortgages has not met with the same success as conventional jumbo mortgages, leaving lenders with a lack of liquidity for these securities.

The assets against which super jumbo mortgages are secured are primarily classified as "luxury" residential real estate, which is highly prone to market volatility in gross dollar terms.

Luxury homes also require substantially more time to market in the event of foreclosure, tying up capital in servicing that would otherwise be invested again.

Lenders use various mitigants to reduce their exposure to downside risk in super jumbo mortgage underwriting.

One common mitigant is the multiple layered risk of writing super jumbo mortgages.

To reduce this risk, lenders utilize a few key mitigants, including the use of mitigants in super jumbo mortgage underwriting.

These mitigants can help lenders manage their exposure to risk and protect their investments.

Key Super Jumbo mortgage mitigants include income verification and asset verification.

Multiple appraisals are often required for luxury homes valued at $1,500,000 or more. This is because setting market values for these properties can be difficult.

Super jumbo mortgage lenders may require a minimum of 2 full appraisals to ensure the property's value is reasonable. The lender's risk and associated premiums depend on the property's value.

For unique properties or those with limited comparable sales, additional field review appraisals, desk review appraisals, and broker price opinions may be ordered. These extra steps help substantiate the property's value for the lender.

The lender's security interest is only justified if the property has a reasonable value. This is a significant concern for lenders, especially when dealing with high-value properties.

Recent events have severely impacted the ability of conventional lenders to make loans larger than the Fannie Mae conforming loan limit, which is $417,000 for a single family residence in most states.

The inability of most mortgage originators to sell or otherwise deliver large loans to investors has led to a reduction in the Loan To Value permissible in a traditional super jumbo mortgage. This means borrowers must now make larger cash down payments to make up for the reduction in leverage.

The current constraints are leading mortgagors to make larger cash down payments to make up for the reduction in leverage currently being afforded. This is a significant change from the period from 2003 to June 2007, when the capital markets were willing and able to purchase these securities.

In response to the tightened lender guidelines for loans over $1,000,000, many borrowers are using specialty mortgage brokers to assist with these unique loans.

Interest rates on super jumbo mortgage loans are higher than those on conventional jumbo loans, with rates above $2,000,000 potentially being 1% to 2% higher or more.

Lenders charge higher interest rates on super jumbo mortgage products to account for the increased risk and reduced liquidity associated with these loans.

Below $1,000,000, super jumbo mortgage rates are generally within 50 basis points (half of a percent) of an equivalent jumbo mortgage interest rate.

If you're considering a super jumbo mortgage, you can use a calculator to compare fixed-rates and ARMs side-by-side, looking exclusively at the principal & interest portion of your loan.

Our FRM super jumbo mortgage calculator allows you to compare fixed-rates, ARMs, and I-O only payments side-by-side, helping you make an informed decision.

Super jumbo mortgage lending is a niche activity, not typically engaged in by consumer-focused banks. Instead, it's often arranged by mortgage companies that specialize in financing multimillion-dollar transactions.

These companies often partner with investment banks and private mortgage capital sources to facilitate these large loans. The preponderance of super jumbo lending is indeed handled by these specialized mortgage companies.

Trends in super jumbo mortgage lending show a strong preference for cash flow option ARM loans. This is due in part to the borrower's perception of negative amortization as a means to extract cash from their home's equity, rather than an asset to be preserved.

Super Jumbo mortgage lending is a niche activity that's not directly engaged in by most consumer-focused banks. They partner with mortgage companies that specialize in financing multimillion-dollar transactions with the help of investment banks and private mortgage capital sources.

The popularity of unconventional mortgage programs amongst the wealthy is understandable due to the unconventional requirements of many super jumbo mortgage applicants.

Negative amortization is a key feature of cash flow option ARM loans that's particularly appealing to super jumbo mortgage borrowers. This allows them to defer interest above and beyond the Loan To Value stipulated on the note.

In a conventional mortgage, borrowers would need to take out a second mortgage or line of credit to extract cash locked in their home's equity, but CLTV guidelines from most super jumbo lenders preclude the use of most of these products for this purpose.

Bigger home loans tend to come with stricter requirements, which makes sense when you think about the lender's risk.

A strong credit history is essential for qualifying for a super jumbo mortgage loan, with a FICO credit score of 720 or higher typically required.

A loan-to-value ratio of 70% or less is also a common requirement for these types of loans.

To qualify for a super jumbo mortgage loan, borrowers typically need to have sufficient income to manage the monthly payments and repay the debt.

A borrower's credit score can affect the minimum down payment required, with higher scores allowing for smaller down payments and lower scores requiring larger down payments.

Here are the typical qualification criteria for a super jumbo mortgage loan:

In more expensive real estate markets, such as the Seattle metro area, the current median home price is north of $900,000, making jumbo and super jumbo mortgage products more necessary for home buyers.

California mortgage loans up to $5 million are now available for borrowers who meet certain qualification criteria. These loans are commonly referred to as "super jumbo" mortgage loans.

Lenders exercise increased caution and scrutiny of borrowers, requiring great credit scores, typically at least a 10% or 20% down payment, and proof of significant financial assets. Funding approval for high net worth individuals is done on a case-by-case basis.

Interest rates for these loans typically rise significantly with the amount borrowed, with a spread over conforming mortgage rates that might be close to a half percent for loans at or below $1.5 million.

These loans use bank statements to verify income instead of tax returns, making them a great option for self-employed borrowers or those with irregular income.

They're not limited to self-employed borrowers, and can be used for multimillion-dollar home purchases in California.

Bank statement loans can be applied to primary residences, second homes, or investment properties in the $3 million – $5 million size range.

Asset Depletion Loans Allow Borrowers to Use Assets as Income

Asset depletion loans use savings or investments to qualify for a loan instead of income from employment.

This type of loan can be used to purchase a primary residence, second home, or investment property.

Both Bank Statement and Asset Depletion Loans Can Be "Jumbo" Loans

These loans are often labeled as "jumbo" because they're used for multimillion-dollar home purchases in California.

They can be a great alternative to traditional mortgage loans for borrowers who might not qualify.

We Can Help You Determine How Much You Can Borrow

Our staff can answer any questions you have and help you determine how much you might be able to borrow based on your unique situation.

Mortgage lenders exercise increased caution and scrutiny of borrowers for super jumbo mortgage loans. This is because the size of the loans is typically higher than conforming mortgage loans.

To qualify for a super jumbo mortgage loan, you'll need a great credit score, at least a 10% or 20% down payment, and proof of significant financial assets. Funding approval is done on a case-by-case basis.

Interest rates for super jumbo mortgage loans can be significantly higher than conforming mortgage rates. The spread over conforming mortgage rates can be close to a half percent for loans at or below $1.5 million, but can rise to a percent or two for loans above that level.

Loans can be structured as fixed-rate mortgages, ARM loans, hybrid loans, or even negative amortizing option ARMs. Some lenders offer these options to help borrowers manage their payments.

Maintenance and property taxes are major issues for owners of expensive homes. For example, owning a $20,000,000 home in New York City could lead to spending over $500,000 a year in property taxes.

In Washington State, mortgage loans are categorized into conforming and jumbo loans. A conforming mortgage loan meets the size requirements set by the Federal Housing Finance Agency and can be sold to Freddie Mac and Fannie Mae.

To qualify for a conforming mortgage, you'll need to borrow within the limit set for your county, which varies. The conforming limit is the maximum amount you can borrow and still qualify for a conforming mortgage.

Jumbo loans, on the other hand, exceed the conforming loan limit for your county. If you borrow more than this limit, you've entered jumbo mortgage territory.

A super jumbo mortgage is a catchall term that typically refers to mortgage loans that exceed $1 million. This type of loan is often used for high-end properties or when you need to borrow a lot more than the conforming limit.

Here's a rough estimate of the loan amounts we're talking about:

Keep in mind that these are general estimates and loan limits may vary depending on your county and other factors.

Fixed rates have traditionally dominated the market, accounting for around 94% of new refis and 94% of new home purchase loans. This is according to data from the end of 2018.

However, high-wealth families are more likely to use adjustable-rate loans to lower their short-term interest expenses. CoreLogic highlighted how prevalent ARMs are for wealthy families.

Roughly 10% of new refis and 6% of new home purchase loans were structured as traditional or hybrid ARM loans at the end of 2018. This shows that fixed rates are still the norm, but adjustable rates are gaining traction.

To get a super jumbo mortgage loan, you'll need to have an excellent credit score, typically 10% or 20% down payment, and proof of significant financial assets.

Most lenders require a down payment of at least 10% or 20% on large loans, and interest rates rise significantly with the amount borrowed.

Funding approval for high net worth individuals is done on a case-by-case basis, and interest rates can be almost a half percent higher for loans at or below $1.5 million, rising to a percent or two for loans above that level.

A mortgage is essentially a loan from a lender to a borrower to purchase or refinance a home. It's a huge financial commitment, but understanding the basics can help you navigate the process.

A mortgage is secured by the home itself, meaning that if you default on the loan, the lender can foreclose on the property and sell it to recover their losses. This is why lenders are so careful about who they lend to and why they require a down payment.

In the United States, the conforming loan limit is set by Fannie Mae and Freddie Mac, which are government-sponsored enterprises that provide liquidity to the national mortgage market. These limits vary by region, but in California, the conforming loan limit is up to $5 million.

To qualify for a mortgage, you'll typically need to have a strong credit history, a steady income, and a decent down payment. The minimum down payment required can vary based on the amount being borrowed, the purpose of the loan, and your credit score.

Here are some common types of mortgage loans:

Keep in mind that these types of loans come with stricter qualification criteria and may require a higher down payment or better credit score.

Understanding the difference between loan types can be overwhelming, but it's essential to make informed decisions about your mortgage. Jumbo loans exceed the conventional conforming mortgage limits.

In the US, the conforming mortgage limit varies by location, but it's typically around $510,400. Jumbo loans, on the other hand, can range from $1,500,000 to $2,000,000 in the Midwest, where homes are relatively affordable.

In areas like Manhattan, the cost of living is much higher, and $1,000,000 might not even buy a small home. This is why mortgage lenders in wealthier areas often refer to super jumbo loans as those above $3,000,000.