If you've researched how to get a jumbo loan with a low down payment and no mortgage insurance, you've probably seen lots of conflicting information. 

Do you need 3% down or 30%? Do you need 6, 12, or 24 months of cash reserves? If you have a lower down payment, will you be required to have private mortgage insurance (PMI) or not?

The truth is that the answers to these questions will vary greatly depending on your lender. 

In this post, we'll cover why there's a lot of misinformation surrounding jumbo loans and what you can do to qualify for one with a low down payment and no private mortgage insurance (PMI).

TLDR Key Takeaways

• Jumbo loans are considered risky loans for many lenders, so they often have stricter requirements for borrowers to meet. 
• Some programs don't require mortgage insurance since the thresholds for PMI differ from conventional loans.
• Even though lending requirements for jumbo loans vary, there are a few things you can do to ensure you qualify, such as maximizing your credit score and shopping around for a flexible lender.

Why Do the Requirements for Jumbo Loans Vary?

Jumbo loans exceed conventional loan limits set by the Federal Housing Finance Agency (FHFA), meaning they aren't government-backed by Fannie Mae or Freddie Mac.

Since these loans are considered riskier for lenders, they tend to set their own strict requirements for borrowers. Some lenders are more traditional with what they want borrowers to come to the table with, while others are more flexible.

Here's a quick chart that shows just how varying these ranges can be:

To better understand how these requirements influence each other, let's take a closer look at each factor.

Your Credit Score

Your credit score is one of the most important factors in determining whether you qualify for your jumbo loan or not and what the terms of the loan will be.

For example, if you have a credit score of 680, you should expect to have higher interest rates, a larger cash reserve requirement, and lenders may require a down payment of 20% or more.

In contrast, a credit score of 740 could land you a 5% down payment with lower interest rates and a smaller cash reserve requirement.

It's important to ensure your credit score is as strong as it can be before applying for a jumbo loan.

Your Down Payment

The amount you'll need to put down depends on a few factors: your lender, credit score, and loan amount. 

Typically, the higher your credit score, the more likely you are to secure a lower down payment. However, lenders may stick with traditional guidelines and still require borrowers with a 740+ credit score to put 20% down. 

Additionally, your loan amount will dictate how much you're required to put down. For example, loans less than $1.5 million have the potential to only put down 3.5%, while loans of 2 million require a minimum of 10% down.

The best way to find out how much you'll need to put down is to talk to your lender.

Your Debt-to-Income Ratio

Aside from your credit score, this will be another key factor lenders take into account when deciding whether or not to qualify you for your jumbo loan.

Your DTI is a measure of how much debt you have compared to your total income. It's used as an indicator of whether or not an individual can be able to pay back their debts in full and on time.

Lenders typically like to see a DTI ratio of no more than 43%, but some may go as high as 50%. However, it's best to have a lower DTI to increase your chances of landing your jumbo loan.

Your Cash Reserves

The amount of cash reserves required on top of the down payment can be a big shock for some people. 

Generally, lenders will require borrowers to have at least six months' worth of cash reserves when applying for a jumbo loan. But depending on the lender's guidelines, this amount could be higher.

For example, some lenders require 24 months of reserves even if you're putting 20% down. For a $2 million jumbo loan, you'd need to have $587,000 ready and waiting. That's not something many borrowers have on hand.

Remember, these loans are considered risker than conventional loans, so lenders want to see that borrowers have enough cash on hand to cover their monthly mortgage payments—especially if their income unexpectedly decreases.

Do Jumbo Loans Require PMI?

Since mortgage insurance protects the lender if you default on your home, some lenders require it if you're putting less than 20% down on your new home. But that's not always the case. 

Modern Day Lending makes it possible to qualify for a loan with no mortgage insurance—even if you have a lower down payment.

How Do Get Low Down Payment Jumbo Loans With No Mortgage Insurance?

To make sure you qualify for a jumbo loan with a low down payment and no mortgage insurance, you need to make sure you do a few things:

1. Maximize your credit score: You need a minimum of 680 to qualify for most jumbo loans. But the stronger your credit score, the easier it is to get a loan with the best terms.
2. Prepare your down payment and cash reserves: You should have at least six months of cash reserves and 10% set aside for your down payment. For those of you that have saved 20%, you might be able to split that into your down payment and cash reserves if you have a high enough credit score.
3. Look for a lender with flexible requirements: Many big banks tend to have stricter requirements for their jumbo loans, so you might have to shop around for the lender that works for you.

Jumbo Loans Without Jumbo Requirements 

Many lenders want jumbo loan borrowers to have hefty down payments and exorbitant amounts of reserves—even if they advertise otherwise.

But not us!

At Modern Day Lending, we know how daunting it can be to qualify for a jumbo loan, which is why we learned the ins and outs of every jumbo loan program available so we can provide you with the best options for your financial situation.

If you're serious about qualifying for a jumbo loan but don't think you've got enough for your down payment, connect with a member of our team and see what options are available to you.