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Jumbo Loan Down Payment

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Photo by Zac Gudakov on Unsplash
Josh Rapaport
February 2, 2023

Before borrowing a Jumbo loan, you must consider a few factors to qualify for the loan faster. First, you must find a suitable lender and consider the interest rates offered and the requirements needed for the loan.

A down payment is one of the many crucial requirements of a Jumbo loan. Without the required Jumbo loan down payment, you may not qualify for the loan that easily. This is why District Lending is here to provide you with tips on how to qualify for a Jumbo loan even if you cannot afford the down payment. You will learn how to apply for the loan and what to do next once you qualify. Read on to gain more insight.

What is a Jumbo Loan Down Payment?

Jumbo loans are normally available to homebuyers wanting to purchase expensive properties. Their limits are slightly higher than conventional loans, which is why they require a larger down payment. A down payment is the amount of money needed in the early stages of requesting a Jumbo loan. Jumbo loan down payment can begin from as low as 5% and go up to 30%, depending on the lender and the amount you are borrowing.

While getting a Jumbo loan with a low-down payment is possible, keep in mind that they are riskier and may come with high-interest rates. But no need to worry because District Lending can help you find a suitable lender who will not overcharge you.

Why Do Jumbo Loans Require a High Down Payment?

Down payment for a Jumbo loan is quite different from other types of loan, but this does not mean you cannot qualify for a Jumbo loan with low down payments. Jumbo loans are riskier, which is why lenders usually set a high down payment to reduce the risk of loss. Here are three main reasons why Jumbo loans are expensive;

Greater Losses

Many Jumbo loan lenders usually worry that borrowers may default on the loan. Even though there are ways they could recover their loan, the idea is to ensure that you can afford to pay the Jumbo loan. This is why they ask for a larger down payment plus other requirements to ensure you can afford the loan.

Huge Loan Amounts

Unlike conforming loans, Jumbo loans have a higher loan limit. Due to this, their down payments are typically set higher.

Jumbo Loans are Not Insured

This is another reason why Jumbo loan down payments are higher. Jumbo loans are not backed up by the Fannie Mae and Freddie Mac enterprises. This means that Jumbo loan lenders are not insured if borrowers default.

Down Payment for Jumbo Loans

Jumbo loans are available for expensive home buyers and those who can afford the required down payment. The limits usually vary depending on where you plan to purchase your home and the lender offering the loan.

For example, if your loan is for a primary residence, you can get a loan of up to $1,000,000 with a down payment of 5%. If it is for an investment property, the down payment can go as high as 20% with a loan of up to $3,500,000.

Normally, a 20% down payment is a favorable benchmark for most Jumbo loan borrowers, but you can always talk to your lender or get help from District Lending to get a better deal. Remember, when it comes to Jumbo loans, lenders are the ones that set their own rules. This means that you will find different lenders with different terms and conditions.

The good news is that some lenders offer a higher loan limit with a low down payment and reasonable interest rates.

How to Find Jumbo Loans with Smaller Down Payments

Finding a suitable Jumbo loan lender with favorable down payment requirements is challenging. Many lenders may ask you to place 20% down to qualify for the Jumbo loan. If 20% seems unreasonable, do not worry because other mortgage lenders will offer you a reasonable loan limit at a down payment of 5% to 10%.

However, you should be careful before signing this contract because low down payments come with their pros and cons. Some of the things you might get include;

  • Higher interest rates
  • High monthly payments
  • PMI (Private Mortgage Insurance)

It is important to seek help from experienced loan advisors or companies like district lending to know how down payments work, how they can affect your payments, and how to get a good loan lender. Other Jumbo loan options you may consider include;

  • Prime Jumbo: The prime Jumbo is suitable for borrowers that want to purchase a home of up to $3 million.
  • Gold Prime Jumbo: With this loan, you can get approved for up to $3,500,000. Some of the requirements needed for a Gold Prime Jumbo loan are; a DTI (debt-to-income ratio) of 50% and seven years of seasoning if you had a foreclosure, bankruptcy, or short sale.
  • Non-QM Platinum Jumbo: The loan limit is also $3 million for this Jumbo loan. The advantage of this loan is that you will only need a one-year tax return program, and you can choose a 40-year fixed interest-only repayment plan.

What If I Cannot Afford the Down Payment Required?

Getting a Jumbo loan with a reasonable down payment is not always the problem. The challenging part is raising the down payment to qualify for the loan. Most borrowers always fail to afford the required amount. If you also are in the same situation, do not panic because you can always consider other loan options, like government-backed mortgages.

These loans are not always expensive and can start with a minimum down payment of 3.5% of the purchase price. This is one reason most first-time home buyers prefer conventional loans since they are affordable and easier to get.

Alternatively, you can begin saving the down payment for the Jumbo loan to ensure you qualify. The first step is to ensure you know how much money is needed for the down payment, then find ways to accumulate it. Here are some of the best ways you can begin saving for a Jumbo loan down payment;

Keep the Profit You Get from the Sale of Your Current Home

If you want to sell your home to purchase a new one, you can take advantage of the profit you make from the sale and use it for the down payment. As much as this may not be the best approach for first-time homebuyers, it is one of the best ways many home buyers have managed to afford a Jumbo loan down payment.

Withdraw from Your Savings Account

You can also get into your savings account and withdraw something for your down payment. However, you must do this with caution because the lender may still want to check how much you are left with in your accounts in case an emergency arises. Before considering this method, ensure you have enough money in your account for the down payment and to cover any future risks.

Find Ways to Improve Your Income

Improving your income is another option you can consider. The more money you get, the easier it is to save for a down payment. First, you can ask your employer if it is possible to get a raise, or you can take a second job if you have time or start a side hustle to make it easier to raise the money.

My Jumbo Loan Down Payment Is Ready: What Should I Do Next?

Once you have the minimum down payment Jumbo loan lender requires, you should begin the application process immediately. Applying for a Jumbo loan is not so different from applying for other types of loans. There are 5 crucial steps that you must follow to qualify for the loan successfully. These steps include:

Step 1: Preparing All Important Documents

Many loans are usually delayed because borrowers do not have all their paperwork ready. Therefore, it is essential to start preparing all your documents as early as possible to avoid loan delay. Some documents that your lender may require include tax returns, pay stubs, investment account records, employment history, and bank statements.

Step 2: Find a Suitable Lender

A suitable lender is one that offers you a good Jumbo loan limit at a reasonable down payment and interest rate. Not all lenders are the same. Some have strict rules compared to others, and that is why you must shop around or get help from District Lending for an ideal Jumbo loan lender. Also, while looking for a lender, carefully review the Jumbo loan down payment requirements to ensure you are comfortable with it before proceeding.

Step 3: Find a Good Home and Make an Offer

Purchasing a home is a big deal. This means that you should find something you will be contented with and be comfortable with for years to come. Once you are prequalified for the Jumbo loan, begin looking for a home, then make an offer.

Keep in mind that many home loans are tied to an appraisal. Therefore, before making an offer, evaluate a home’s price because if you ask for too much, your lender may increase your down payment.

Step 4: Get the Appraisal for Your New Home

Your lender will want to get an appraisal to determine the value of your home before issuing a loan.

Step 5: The Closing Procedure

The final step is to close on your home. This is after the lender has ensured everything required is in order. He will then issue the requested amount, which may take longer because of the extra verification process. Jumbo loans are riskier, so they have to undergo many verification steps before they are issued to the applicant.

How to Calculate the Jumbo Loan Down Payment Needed

What is the minimum down payment for a Jumbo loan? Most people always want to know the minimum amount they need to pay to get a Jumbo Loan. Thankfully, this can be calculated based on the down payment percentage offered.

As mentioned, the lowest Jumbo loan down payment percentage is 5%. With a 5% downpayment, you can get a Jumbo loan of up to $1,000,000; you will not need to pay much money compared to Jumbo mortgages 10% down.

For example, if you are borrowing a loan of $1.5 million at a down payment of 5%. You will only need a down payment of $75,000 to qualify for the loan.

5/100 * $1,500,000 = $75,000.

Who Can Qualify for a Jumbo Loan?

Jumbo loans are always available for anyone who wants to purchase a home that exceeds the conventional loan limits. This type of loan allows you to purchase your desired home and other investment properties. However, you must have a credit score of 720 and above and have a good income report and employment history. Also, remember that the Jumbo loan DTI score should be at 50% maximum.

If you do not know where to find a suitable Jumbo loan lender, District Lending will help you find one with a favorable down payment and interest rate plan.


What is the best Jumbo loan down payment available?

Typically, many Jumbo loan lenders require a downpayment of 20%, but you can always get lenders that offer a 10% or 5% down payment on a loan amount of up to $1,000,000.

Is It difficult to apply for a Jumbo loan?

There is nothing complicated about applying for a jumbo loan. All you need is the required down payment and the necessary documents to qualify for the loan.

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