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Ways to Get the Best Jumbo Mortgage Rates

A 720 credit score and 20% LTV are the best starting point. If jumbo rates are high, a larger down payment or 80-10-10 loan can keep you below the jumbo threshold.
May 22, 2018
Mortgage Rates, Mortgages
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Just as the name implies, a jumbo mortgage is a massive loan, above the conforming loan limit of $453,100 in most parts of the U.S. Even small decreases in jumbo mortgage rates can translate into nice savings for borrowers. Basic requirements for these loans typically are tougher than for conforming mortgages, which are backed by the government-sponsored enterprises Fannie Mae and Freddie Mac.

The best jumbo rates go to borrowers with high credit scores and stronger loan-to-value ratios, which represents the value of the home compared with how much you’ll borrow. You’ll need at least a 680 to 720 FICO score and a 20% LTV — typically achieved by making a 20% down payment. And you might expect rates on jumbo loans to be higher than conforming loan rates. Sometimes they are, but conforming rates can be higher also.

Here are ways to help ensure you get the best jumbo loan mortgage rates — and when alternatives to jumbo loans make sense.

» MORE: Compare jumbo mortgage rates

First, find out if you really need a jumbo loan

Is a jumbo mortgage required in your case? It depends on where you live or want to live. Jumbo loans start at $453,100 in most parts of the country. But in places where it costs more to buy a home, notably California and Washington, D.C., $679,650 is the dividing line. It goes even higher in other places — Honolulu, for example. Check 2018 jumbo loan thresholds by selecting your state or territory and county:

Make sure you have a qualifying credit score and LTV

Your credit score and loan-to-value ratio play a particularly powerful role in determining your jumbo mortgage rate. Although stronger numbers put you in a better position to command lower rates, the minimum 720 credit score and 20% LTV are guides to help you prepare to qualify for the best rates.

» MORE: Check your credit score for free

Research and compare interest rates

Now the question is, is a jumbo loan the cheapest way for you to go, or should you explore other options — read more on this below. To decide, you’ll need to compare current rates for both jumbo and conforming mortgage amounts.

Use NerdWallet’s mortgage rate calculator to enter purchase prices above and below the conforming loan limit in the location where you are looking to buy, and you’ll get an anonymous look at rates like those you might qualify for, as well as estimated monthly payments and fees, without having to share your information with lenders.

The smart move is to shop for the best rates by getting offers from at least three lenders and comparing their annual percentage rates, or APRs.

Now, the smart move is to shop for the best rates by getting offers from at least three lenders and comparing annual percentage rates, or APRs, which represents the full cost of the loan.

If jumbo rates are lower than conforming rates, you can move forward with a jumbo loan. If jumbo rates are higher, there are alternatives.

» MORE: Find the best lenders for jumbo mortgages

Compare alternatives that don’t involve lowering your price range

If you’re being offered jumbo rates that are higher than rates for conforming loans, the best move may be to avoid a jumbo loan. How can you do this and not adjust your price point downward? Here are some workarounds. Whether they’re worth the effort will depend on how much money you would save:

Increase your down payment

If you’re able to, increase your down payment to whittle down the amount you need to borrow until it’s under the conforming loan limit in your area. Of course, finding the money on short notice for a larger down payment isn’t easy. If possible, consider accessing money from savings or other sources.

A larger down payment lowers your loan-to-value ratio, and a lower LTV may help lower your interest rate further.

Use an 80-10-10 loan

You may have heard of an 80-10-10 loan (also “combination” or “piggyback” loan). This loan may be used by borrowers who don’t have a large down payment and want to avoid paying for private mortgage insurance (usually required when loan-to-value exceeds 80%).

Before committing to a combination loan, check to make sure that the rates on both loans and any fees you’ll pay still offer savings compared with a jumbo mortgage.

Here’s how it works: You borrow up to 80% of the home’s price with a primary conforming mortgage up to the local limit, finance 10% of the remaining purchase price with a higher-rate second mortgage — a fixed-rate home equity loan or variable-rate line of credit, for example — then pay the remaining 10% with your down payment.

The trick is to keep the amount of your primary mortgage under the local jumbo threshold. A lender can help you decide what combination of second mortgage and down payment works best to cover the remainder.

Before committing to a combination loan, check to make sure that the rates on both loans and any fees you’ll pay still offer savings compared with a jumbo mortgage.

To recap:

HOW TO GET THE BEST JUMBO MORTGAGE RATES

  1. Polish your borrower credentials: You’ll need at least a 20% LTV and 720 credit score.
  2. Compare APRs from at least three lenders.
  3. If conforming mortgage rates are lower, try using a bigger down payment or an 80-10-10 loan to keep the amount you borrow below the conforming loan limit.

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