Dreaming about a Cape Cod retreat in Falmouth but unsure how to finance it? Many coastal homes here sit above standard mortgage limits, and second-home rules can feel confusing. You want clarity on jumbo loans, what lenders expect, and how local factors like flood zones and septic inspections affect your timeline and budget. In this guide, you’ll learn the essentials to prepare a strong, stress‑reduced purchase plan. Let’s dive in.
What a jumbo loan means in Falmouth
A jumbo loan is any mortgage amount above the annual conforming loan limit set by the FHFA. If your loan amount exceeds the county limit for Barnstable County, lenders will treat it as a jumbo. You can verify the current threshold on the FHFA conforming loan limits map.
Second homes are properties you use part-time for your own enjoyment. They are underwritten more strictly than primary homes but often more favorably than investment properties. In Falmouth, where waterfront and near-water homes are common, jumbo financing is often relevant.
Second home vs. investment rules
Lenders expect you to occupy a second home part of the year and not use it primarily as a rental. If a property is marketed as a short-term rental, many lenders will classify it as an investment, which usually means higher down payments and rates.
Some lenders use distance or travel-time guidelines between your primary residence and your second home. Policies vary by lender, so ask about this early if your primary home is nearby or in the same county.
What lenders look for
Jumbo underwriting is detailed. Expect full documentation and higher standards than conforming loans.
- Credit: Many lenders look for scores around 700 or higher, with mid-700s needed for best pricing.
- Debt-to-income: Lenders typically prefer DTI at or below 43 to 45 percent. Strong assets can help if your DTI runs higher.
- Reserves: Cash reserves are common, often 6 to 12 months of payments or more for larger loans.
- Documentation: Plan on tax returns, W-2s or K-1s, pay stubs, and full asset statements. Gift funds are usually allowed with proper documentation.
Down payment, rates, and mortgage insurance
Jumbo second-home loans often require more money down than conforming loans. While some lenders offer options near 10 to 20 percent down, many expect 20 percent or more, and larger loans may require 25 to 30 percent.
Interest rates for jumbo loans can price higher than conforming loans, but it varies by lender, credit, and loan structure. Private mortgage insurance is typically not used on jumbo loans, so lenders rely on stronger down payments and reserves.
Property factors unique to Falmouth
Coastal homes bring extra review. Planning ahead reduces surprises during underwriting.
- Appraisals and comps: Unique waterfront features and seasonal pricing can make valuation challenging. Lenders may ask for a second opinion if comps are limited.
- Flood zones: Many Falmouth properties are in FEMA flood zones. Your lender will order a flood determination, and flood insurance is required in Special Flood Hazard Areas. You can review your location on the FEMA Flood Map Service Center. For coverage options, explore the National Flood Insurance Program’s consumer site at FloodSmart.gov.
- Coastal insurance: Expect hazard insurance and often wind or hurricane endorsements. Premiums can be higher in Barnstable County, so get quotes early.
- Septic and Title 5: Massachusetts requires Title 5 septic compliance for many transfers. Older or failing systems can delay closing or require repair as a loan condition. Learn the basics on MassDEP’s Title 5 resource.
- Short-term rental rules: If you plan to rent occasionally, confirm local rules and taxes. Check current guidance with the Town of Falmouth Health Department or Planning Department and discuss how any rental activity could affect your loan classification.
- Condos and multi-units: Condo projects must meet lender eligibility for things like insurance and assessments. Multi-unit second homes often face stricter rules and may be treated as investments.
Get pre-approved, not just prequalified
In competitive Falmouth segments, a full-document pre-approval strengthens your offer and reveals any gaps in reserves or documentation before you go under contract. It also helps you compare lenders on pricing and flexibility for coastal properties.
A true pre-approval means an underwriter reviews your full file. This reduces surprises later when the appraisal, insurance, or Title 5 items come in.
Your document game plan
Gathering paperwork early speeds up underwriting and appraisal ordering.
- Two years of federal tax returns, including business returns if applicable
- Two to three months of bank and asset statements
- Recent pay stubs and W-2s, or proof of self-employment income
- Gift letters and evidence of funds, if applicable
- HOA or condo documents for condominiums
- Explanations for large deposits or recent credit inquiries
Timeline and what can slow it down
Coastal appraisals can take longer because of limited comparables and unique features. Lenders may also require flood certifications and, in some cases, additional collateral review.
Title 5 repairs, if needed, can add weeks. Insurance binders for hazard and flood coverage are often required before closing. Start insurance quotes early to avoid last-minute delays.
Budget beyond your down payment
Factor in more than the purchase price and down payment when you plan your total carry.
- Closing costs: lender origination, appraisal, title services, and recording fees
- Inspections: home, septic (Title 5), and any coastal systems such as docks or bulkheads
- Insurance: hazard, wind or hurricane coverage, and flood insurance where required
- Taxes and assessments: include local property taxes in your budget; for reference and contacts, see Falmouth’s Assessing Department
- Potential repairs or compliance items tied to septic, conservation rules, or condo special assessments
Shop smart for a jumbo
Jumbo products vary widely. You can save meaningful money and reduce stress by comparing options.
- Compare national, regional, and portfolio lenders, plus local credit unions and brokers.
- Ask about second-home requirements, reserves, and distance rules.
- Review rate options for both fixed and adjustable-rate structures.
- If you expect a complex appraisal, ask how the lender handles unique coastal properties or multiple appraisals.
For general mortgage basics and loan types, the CFPB’s owning-a-home resources are a helpful primer.
Quick prep checklist
- Verify the current FHFA conforming limit for Barnstable County on the FHFA loan limits map
- Get a full-document pre-approval with a lender experienced in coastal Cape Cod properties
- Gather tax returns, pay stubs, and bank and investment statements; confirm reserves
- Order a Title 5 septic inspection early and complete a full home inspection
- Obtain a flood zone determination and quotes for flood and coastal insurance
- Confirm any short-term rental requirements with the Town of Falmouth if you plan to rent part-time
- Compare multiple lenders and a local mortgage broker for pricing and underwriting flexibility
Work with a local advocate
Buying a Falmouth second home is about more than the view. It is about anticipating coastal risks, aligning your loan with second-home rules, and getting through appraisal, insurance, and Title 5 without surprises. With the right plan, you can move from offer to closing with confidence.
If you’re exploring jumbo financing for a Falmouth second home, connect with a local guide who knows the neighborhoods, the seasonality, and the practical steps that keep a deal moving. Reach out to Laurie Miller to start a focused conversation about the right location, financing approach, and timing for your Cape Cod purchase.
FAQs
How do I know if my loan is jumbo in Barnstable County?
- Compare your expected mortgage amount to the current FHFA conforming loan limit for Barnstable County; if your loan exceeds that number, it is considered a jumbo. Check the FHFA loan limits map.
Can I use rental income from a Falmouth second home to qualify?
- Some lenders allow documented, seasoned rental income, but many exclude short-term rental projections and may reclassify the property as an investment if it is primarily rented.
Do jumbo loans require private mortgage insurance?
- Not typically; jumbo loans usually rely on larger down payments and lender-specific underwriting instead of standard PMI programs.
Are jumbo rates always higher than conforming rates?
- Jumbo rates can be higher, but pricing depends on your credit, loan size, reserves, and the lender; shopping across multiple lenders can narrow the spread.
What insurance should I expect for a waterfront home in Falmouth?
- Plan for hazard insurance, likely wind or hurricane coverage, and flood insurance if the property is in a Special Flood Hazard Area; review maps at FEMA’s Flood Map Service Center.
Will a Title 5 septic inspection affect my jumbo loan approval?
- Yes, in many cases; failing or nonconforming systems can trigger repair requirements or delay closing, so it is wise to complete Title 5 early using MassDEP’s Title 5 guidance as a reference.
