How to get a mortgage for $1M or more

Jumbo home loans generally require putting up to 20 percent down on your purchase and making sure your monthly mortgage payment doesn’t exceed 43 percent of your income before taxes.

You will have to meet certain requirements set by jumbo loan lenders if you want to get a mortgage on a million-dollar home. Jumbo mortgage lenders have their own guidelines for lending, which can differ from guidelines for standard conforming loans. A conforming loan — a loan that meets guidelines set by Fannie Mae and Freddie Mac, which buy this kind of loan from financial institutions — is for a mortgage that’s usually less than $417, 000 but can go as high as $625,500 in certain high-priced markets. Those amounts increased to $424,100 and $636,150 this year. Jumbo loans are loans that exceed the limits of what Fannie Mae and Freddie Mac are allowed by law to purchase.

Reviewing different lenders’ specific requirements could help you find the best lender for your needs.

1. A big down payment

Jumbo loans require a bigger down payment than conventional loans because of the increased risk associated with them. Some lenders, however, allow smaller down payments on jumbo loans. In this competitive market, lenders competing for qualified buyers have loosened rules about the down payment requirement, and some even offer jumbo loan financing for as little as 10 percent down. And unlike conforming loans, putting down less than 20 percent on a jumbo loan doesn’t necessarily mean you’ll have to pay costly private mortgage insurance.

2. High income

You need to be a high earner to get — and make payments on — a mortgage on a $1 million house. Lenders want to be sure your debt-to-income ratio enables you to make your monthly mortgage payment and satisfy that indebtedness as well as pay your other debts. Many lenders require a debt-to-income ratio of 43 percent or less if you’re putting down 20 percent or more.

When you apply for a jumbo loan, you’ll need documents that outline proof of your annual income, liquid assets, nonliquid assets and any other loans that you might hold.

3. High credit score

Due to the higher value of jumbo loans, you’ll need a higher credit score to get such a loan. All lenders set their own credit score requirements, however, so make sure you check first and find out what your lender is looking for in a borrower.

A credit score of 680 generally will get you most available loan options, but those options will likely come with a higher rate than you would get with a credit score of 780 or greater.

Large, national banks aren’t the only financial institutions that offer jumbo loans for buying a million-dollar home. Small community banks, credit unions and national lenders such as Quicken Loans and Guaranteed Rate also offer loans for $1 million or more. You also can ask for recommendations from your real estate agent, who should know which lenders in your area will likely approve you for a jumbo mortgage.

Your mortgage amount might be lower than you expect on a jumbo loan, depending on your down payment and interest rate. Your mortgage interest really can drive up your monthly payment, but mortgage rates on jumbo loans might also be better than you think, too.

When taking out a mortgage for more than $1 million, make sure you discuss all of the loan options available to you with potential lenders and weigh the benefits and risks of each. Estimate your mortgage payment before house hunting so that you end up with a mortgage rate you can love as much as the dream home you end up buying.

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