Jumbo Loan in Phoenix: How Does it Work?

jumbo loan phoenix

Are you looking to purchase your dream home in Phoenix and think a jumbo loan is the best option? Given that jumbo loans are naturally high-risk loans, you may be wondering whether it is even possible to get one that has an affordable interest rate. Many people do not know the benefits of Jumbo Loans at their disposal. Some even steer clear of jumbo loans, despite being qualified for one.

Jumbo loans are the solution for purchasing expensive properties that you find in high-cost areas exceeding the conforming loan limits. In Phoenix and most parts of Arizona (including the US, in general), that loan limit for a conventional mortgage is $548,250.

The Highly-Motivated Vercellino Team is here to advise you on the exact loan you need to buy your Phoenix dream home. We will walk you through Jumbo Loans and tell you more about this fantastic home loan option.

General Jumbo Loan Limit

The jumbo mortgage limit recently increased by 7.5% from $510,400 in 2021. However, this amount indicates the mortgage amount and not the overall value of the property. This means that for a mortgage to be termed a jumbo loan in Phoenix, it must exceed the $548,250 limit. Fannie Mae and Freddie Mac, the government-sponsored agencies that back the bulk of residential mortgages in the United States, sets the conforming loan limits.

While the set limit for most of the U.S is currently $548,250, the limit for counties in the US, considered to be expensive areas, is as high as $765,600. Typically, jumbo loans have higher interest rates and FICO scores because the bulk of the risk resides with the lender. If things do not work out, they cannot sell off the loan to Fannie Mae and Freddie Mac.

How do Jumbo Mortgages in Phoenix Work?

What obtains in Phoenix is pretty much what you’ll find in most parts of the country, except in regions like New York, Los Angeles, etc. But the rules governing jumbo mortgage rules are different from those for conventional mortgages. The risks involved in issuing non-conforming loans, as well as the qualification criteria, are higher.

For example, most lenders will offer jumbo loans ranging from $3 million to $5 million for a single-family property. Apart from the risk skyrocketing, the lender can hardly sell the loan to Fannie Mae or Freddie Mac. So lenders issuing jumbo mortgages will usually scrutinize borrowers thoroughly to reduce the risk of accumulating bad loans.

Since the loan amount is significantly going to be higher, you must prove beyond doubt that you can pay back; and there are way more stringent requirements to qualify for jumbo loans. In most cases, lenders will screen borrowers based on the following terms and conditions:

Debt to income ratio

If you have any ongoing monthly obligations, they must not exceed 43% of your monthly income. To qualify for a jumbo mortgage, lenders prefer working with clients with less than 43% debt-to-income ratio. Your monthly payments will be higher than you'd pay for conventional loans, so you need to prove that you will meet up with repayments as and when due.

Credit Score

While a borrower looking to get a conforming loan may get approved with a credit score as low as 620, it is different with a jumbo loan. To qualify for a jumbo loan in Phoenix or anywhere in Arizona, you will need a credit score of not less than 700.

This should suffice for a jumbo loan of one or two-unit property with a loan limit of up to $1 million. For jumbo mortgages between $1 million and $1.5 million, you should think of a credit score of 720, and it goes on like that.

Down Payment

Most mortgage lenders in Phoenix will approve conventional loan requests with a down payment as low as 3% of the property purchase price. However, many lenders will not consider you without a down payment of at least 20% of the total mortgage. Keep in mind that the figure is not universal and may vary from lender to lender.

Income and Assets

As mentioned already, lenders will screen borrowers; it often involves a thorough assessment of your business, nature of work, source of income, and assets. Be ready to have this discussion if you plan to get a jumbo mortgage. Lenders will ensure you have a stable source of income and sufficient assets before approving your application.

Property Appraisals

Following up with your income and asset declaration is a fair market appraisal of your liquid assets. Some lenders may carry out multiple property appraisals to ensure that the purchase price reflects the actual value of the property/assets.

Jumbo Loan Lenders in Phoenix

The jumbo loan process is strikingly different from traditional real estate loans when you look at the qualification criteria, loan terms, and interest rates due to higher risk. Since Phoenix does not have any regions considered high-cost areas, the new limit of $548,250 remains the conforming loan amount, which also applies to the rest of Arizona.

However, you can still apply for jumbo loans in Arizona. The loan limits and requirements for jumbo loans in Phoenix usually vary from one lender to another. Roughly speaking, you can expect the limits to range from $2 million to $5 million, and it could be more.

Why you should trust Phoenix Home Loan with your jumbo loan application

Jumbo home loans are defined as any loan amount above $548,250, but most potential property owners fear the down payment required. Contrary to what other brokers say, Jumbo loans do not necessarily require 20% down. Some financing solutions require as little as 5% down payment, allowing you to easily buy your dream home.

Based on our experience working with many clients over several years, we believe that you can rely on us for your jumbo mortgage needs. The Highly Motivated Vercellino Team is ready to answer any further questions you have about jumbo loans. We can also show you the steps for how to start one.

Video Transcript

Hi everybody. My name is Jimmy Vercellino, producing branch manager and trusted advisor with First Western Trust Mortgage Division, and I’m excited to talk to you today because I’m gonna talk about JUMBO LOANS.

You know what they say right ? “Go Big or Go Home!” Well in order to go big and GET HOME you and I need to talk about Jumbo mortgages.

Here’s the deal. Jumbo home loans are classified as any loan amount above $510,400. Keep in mind this could vary depending on where you live, but for the most part these mortgage options do not adhere to traditional Fannie Mae and Freddie Mac guidelines, allowing lenders to become more flexible in providing creative financing solutions for you- the prospective home buyer.

Loan amounts for these mortgage types can vary and are different from investor to investor, allowing buyers in some cases to finance a property in excess of $2,000,000.

Contrary to popular belief, Jumbo loans do not necessarily require 20% down. In fact, there are financing solutions that require in some circumstances as little as 5% down payment, allowing you to obtain your dream home.

Keep in mind that credit scores for Jumbo home loans vary from lender to lender and it’s important to contact a mortgage lender such as myself before you go out shopping for a home.

If you’re in the market to apply for a JUMBO home mortgage contact my office today by calling 602-908-5849 or you can visit my website at PHXHomeLoan.com.

My team and I look forward to serving you with all your home financing needs.