We are not aware of lenders that offer jumbo mortgages that permit a down payment of less than 10%. In fact, more aggressive jumbo lenders apply a maximum loan-to-value (LTV) ratio of 85% to 90%, which means you are required to make a down payment of 10% to 15%. More conservative lenders use an LTV ratio of 80% or even lower for larger jumbo mortgages.
It is important to highlight that lenders have more control in determining program guidelines for jumbo mortgages which leads to a wider range of qualification requirements and loan terms as compared to conforming loans. This means not all jumbo mortgage lenders apply the same down payment, debt-to-income ratio, borrower credit score or reserve requirements.
Additionally, jumbo mortgage lenders may be more flexible in how certain qualification requirements are applied, at least for well-qualified borrowers. For example, if a lender is keeping a mortgage on its books instead of selling it, they may allow a lower down payment, especially for applicants with strong financial profiles who have excellent credit scores, low debt-to-income ratios and significant financial assets. On the other hand lenders are less likely to make exceptions or bend the guidelines for applicants with high debt-to-income ratios and a smaller financial cushion.
Review What is a Jumbo Mortgage
This is a long way of saying that with jumbo mortgages, you do not know what is possible until you ask the lender. For example, we think it is unlikely that you find a jumbo lender that allows a down payment of 5% but there may be a lender willing to approve the mortgage based on your individual circumstances.
The table below outlines jumbo mortgage rates and fees for leading lenders in your area. We recommend that you contact multiple lenders to understand their qualification requirements as guidelines vary by lender, loan amount, applicant and other factors. Plus, shopping lenders is the best way to save money on your mortgage.
In addition to contacting the lenders above, you can use the FREEandCLEAR Lender Directory to find jumbo lenders. Our directory features over 3,800 lenders and enables you to search by lender type and loan program. For example, you can search for banks in your state that offer jumbo mortgages. In some cases, national and regional banks with brokerage divisions may offer more aggressive jumbo loan terms, especially if you transfer all or some of your assets to the bank.
If you cannot find a jumbo mortgage lender that allows a down payment of less than 10%, your other option is to get a second mortgage, also known as a piggyback loan, that enables you to reduce your mortgage amount to below the conforming loan limit. Loan amounts above the conforming limit in your county are jumbo mortgages while loan amounts below the limit are conforming mortgages. Having a conforming mortgage instead of a jumbo mortgage may enable you to qualify for certain low down payment programs.
For example, if you want a $650,000 mortgage to buy a home, which is above the conforming loan limit in your county, you apply for a $510,000 first mortgage -- which is below the loan limit -- and a $140,000 second mortgage. The total amount of your mortgages is the same but because your first mortgage is not a jumbo loan, you may be able to qualify for programs that permit a lower down payment. Additionally, if the LTV ratio for the first mortgage is less than or equal to 80%, because the loan amount is lower, you may also avoid paying private mortgage insurance (PMI).
Review How to Use a Second Mortgage to Buy a Home
It is important to highlight that the second mortgage lender may place a limit on the combined loan-to-value (CLTV) ratio for the first mortgage plus the second mortgage so you still may be required to make a 10% down payment, depending on lender guidelines. That said, combining a conforming first mortgage with a second mortgage may offer more financing flexibility than applying for a single jumbo mortgage.
The table below outlines second mortgage rates and fees. We recommend that you contact multiple lenders to learn more about second mortgage qualification requirements and loan terms.
“What is a jumbo loan?” CFPB. Consumer Financial Protection Bureau, February 24 2017. Web.