In a country where bigger is often considered better, a jumbo mortgage, to the novice, might sound like something special.
But unless you are a fan of higher down payments and stricter mortgage requirements, you'll want to think carefully before taking out a jumbo loan to buy a house.
Fannie Mae and Freddie Mac each year snap up millions of mortgages on the secondary market from banks, freeing them up to make even more loans to buyers.
But the two federal mortgage giants are barred from buying jumbo loans, defined by the federal government as anything above $453,100 nationally, with higher limits in many hot markets.
Most banks still offer jumbo mortgages, but, since they are not backed by the federal government, there is more risk involved for the lenders.
And banks typically offset risk with hitting borrowers with higher costs and borrowing standards. For a buyer, that could very well mean having to put up a 20% down payment and having enough saved up to cover a year's worth of mortgage payments. Also, if you don't have a credit score of 700 or higher, you might not even get that far.
The good news is that surging home prices have forced the federal government to raise jumbo limits for the first time in more than a decade.
This year's cap of $453,100 is the result of a nearly 7% hike from the year before by the feds.
But the bad news is that in more than a few hot metro markets, prices have been going up faster than jumbo loan limits. And the increase, while substantial and also coming after a much smaller one last year, is the first major adjustment in a decade.
And it's pretty clear what has happened to home prices since then, especially since 2012.
It all depends on where you live. But if you are in a highly desirable city with a shortage of listings, it won't be hard to blow past even the higher, $600,000-plus jumbo limits.
Here are the jumbo limits in some of the country's largest metro markets and how they stack up to current prices.
Los Angeles County
The City of Angels and its environs have fun, sun, stars and, at more than 10.1 million people, the most people of any county in the country. Los Angeles County also has some of the highest home prices, making it one of the most expensive places to live in the country as well. The good news is the big increase in the jumbo loan limits will provide buyers in the L.A. area with a bit more wiggle room. The median price of homes sold in the county is more than $601,000, which should keep the "average" buyer well below jumbo territory, which now starts at $679,650. The bad news: Prices are expected to rise another 7.1% over the next year, pushing the median past the $650,000 mark.
Cook County, Ill.
Home to Chicago, Cook County has 5.2 million people, making it the nation's second largest county. Home prices in the Chicago area have not hit the heights seen in other major markets, in particular on the coasts. While that may be a frustration for homeowners looking to sell, it is good news for Chicago-area buyers, particularly those not thrilled with the idea of having to take out a jumbo loan. The median listing price of homes for sale in Cook County is $284,900, according to Zillow, or significantly less than the jumbo loan threshold for the county, which stands at $453,100.
Harris County, Texas
Home to Houston, Harris County was hit hard by Harvey, which caused extensive flooding and other damage. The Houston area, though, has been a major draw for home buyers due to its relative affordability. Harris County's population has growth by nearly 600,000 over the last eight years, bringing the total number of residents to 4.6 million. The average listing price for homes in the Houston area is $282,500, more than $170,000 below the jumbo threshold of $453,100, Zillow reports.
Maricopa County, Ariz.
The real estate market is sizzling in Maricopa County, home to the Phoenix area and its 4.3 million people. Home values rose 8.2% over the last year and are set to rise another 3.9% over the next 12 months, Zillow reports. The median listing price in the Phoenix areas is $309,000, still well below the jumbo threshold of $453,100.
San Diego County, Calif.
The good news is that the federal agency in charge of jumbo loan limits, the Federal Housing Finance Agency, raised the jumbo threshold this year to nearly $650,000, up from $612,950 in 2017. The bad news is that home prices are rising even faster. The median home value in the San Diego area is set to rise 9% over the next year after a 9.3% jump in 2017. The median listing price, at $655,888, is in jumbo territory, though the median price of homes sold in the San Diego area comes in a bit lower at $575,800.
Orange County, Calif.
Home buyers in suburban Orange County near L.A. have it even tougher when it comes to mortgage affordability. The jumbo threshold for the county of 3.1 million, at $679,650, is higher than in San Diego County. But home prices in Orange County are also higher. The median price of homes on the market is nearly $800,000 while the median price of homes sold is $702,100, well above the jumbo threshold for the area, according to Zillow.
Miami-Dade County, Fla.
Miami area home values rose 7% last year and are projected to rise another 3.4% this year. The median listing price for homes in Miami-Dade, the nation's seventh largest county at 2.7 million, stands at $465,000, over the jumbo limit of $453,100. The median price of home sold, though, is a somewhat lower $373,400.
Kings County, N.Y.
The Brooklyn real estate market is hot these days and so is Kings County, which encompasses the New York borough of 2.6 million people. The jumbo threshold is $679,650. The median listing price for Kings County, which weighs in at $779,000, is well above that, though the median sale price of homes sold, at $626,200, remains below the jumbo threshold. But with home values expected to jump almost 8% this year, how much longer that will be the case is anyone's guess.
Dallas County, Texas
Dallas area home values are rising fast, having gained 14.8% last year and on track for another 6.8% jump this year. But at just under $400,000, the median listing price in this county of 2.6 million has yet to hit the jumbo limit of $453,100. The median price of homes sold, at $300,400, has even more room to stretch before hitting the jumbo limit.
Riverside County, Calif.
Home values in Riverside and surrounding communities have been going up, with a 9.1% increase over the past year. But given the capital of California's Inland Empire is still a good hour and half drive from L.A., prices remain lower than in Los Angeles and Orange counties. The median listing price of homes in this county of 2.4 million is $399,990, while the median price of homes sold is $368,600. Both are well within the jumbo threshold for the area of $453,100.