How Much of a Down Payment Do I Need for a Jumbo Loan?

How Much of a Down Payment Do I Need for a Jumbo Loan?

As we referenced in our previous article, jumbo loans are required when purchasing an expensive, luxury home. A jumbo loan is only applicable if the home price is above your county’s limit for a conventional loan. Due to escalating home prices, it is becoming the norm for a home to be priced above an area’s limit for conventional loans, making the need for jumbo loans common. Therefore, knowledge of jumbo loans is essential.

One of the main questions borrowers is “How Much of a Down Payment Do I Need for a Jumbo Loan”? Depending on the price of the property, the down payment will increase. However, usually the minimum will be $5,000.

Jumbo Loans with a 5% (or Less) Down Payment

Remember, jumbo loans are for properties priced above $453,100 and $625,500 (depending on the conventional loan limit in your county). Since home prices are now passing these limits, jumbo loans are more necessary than ever. Consequently, mortgage lenders are offering jumbo loan programs with very little down payment. However, a borrower would usually need to have a good credit score in order to qualify for such a jumbo loan with such a low down payment.

For example, Kingston Mortgage offers a jumbo loan program with only a 5% down payment if your credit score is 760.

Jumbo Loans with a 10% Down Payment

Jumbo Loans with down payments of 10% tend to be misrepresented because they are typically portrayed as being a program with a low down payment. It is also usually implied as being a good deal. It is true that a 10% down payment is significantly less than 20%. But, on its own, a 10% down payment is not necessarily low. In reality, a down payment of 10% is actually a common service provided by mortgage lenders.

Despite this, mortgage lenders may say you must meet certain requirements, like having higher credit scores in order to qualify for such a program. But, it is easy to find a program with a 10% down payment and no extra requirements. For example, Kingston Mortgage offers a non-conforming jumbo loan program (which offers loans from $2.5 million to $15 million), with a down payment of 10% on a $15 million home.

Jumbo Loans with a 20% Down Payment

Mortgage lenders usually have a jumbo loan program which requires a down payment of 20%, just like they would for a conventional loan. In the point of view of the mortgage lender, putting a down payment of 20% on a jumbo loan shows them that you have a history of saving and will be able to make timely payments. If you do wish to place a down payment of 20% Kingston Mortgage is able to offer lower interest rates.

If your goal is to have a jumbo loan with a low down payment, it is possible to find such a program. Keep in mind that depending on how low of a down payment you wish to give you may need to have a good credit score such as 740 or 760.

Jumbo Loans with 25% Down Payment

Big Banks such as Wells Fargo and Union Bank typically require a down payment of 25% or more along with excellent credit to qualify for a jumbo loan. As an example, Bank of America requires a down payment of 27.5% and a credit score of 740 or higher. Therefore for a home worth $925,000 Bank of America requires a down payment of $250,000. Big banks usually offer higher interest rates for jumbo loans.

Their reasoning is that jumbo loans are only required for large loans, therefore the mortgage lender feels more secure in issuing the loan if the borrower puts more of their own personal money down. However, a down payment of 25% or more is quite large especially when housing prices are to jumbo loan standards.