A jumbo loan, also known as a non-conforming loan, is a mortgage loan that exceeds the maximum loan limit for conforming loans. Jumbo loans are used when a borrower needs to finance a property that exceeds the maximum amount for a conventional loan.
Conforming loan limits are determined and reviewed every year by the Federal Housing Finance Agency (FHFA) and limits are set by the county. Most counties nationwide have a conforming loan limit of $647,200. However, in high-cost living areas, a few county limits were expanded to $970,800, especially those in the ever-populous northeast coast and west coast. If you’re looking to purchase a home whose price falls above conforming loan limits, you might need a jumbo loan.
There are several benefits of jumbo loans, including:
- Single loan: a benefit of having a jumbo loan is not having to do a first and second loan on a property in order to purchase a home.
- Larger loan amounts: Jumbo loans can provide borrowers with the funds they need to finance a property.
- Flexible terms: jumbo loans often have more flexible terms than conventional loans, giving borrowers more options.
- A lower down payment: Some jumbo loan options offer as little as five percent down.
To qualify for a jumbo loan, borrowers typically need:
A high credit score: Jumbo loans are available to borrowers with good or excellent credit.
Stable income and employment: Lenders will typically require borrowers to have a stable income and employment before approving a jumbo loan.
Debt-to-income ratio: Lenders will review your debt-to-income ratio (DTI) to ensure that you’re not overleveraged on your monthly payments.
If you believe a Jumbo Loan may be right for you, you can submit an application today. In the meantime, if you have any questions about Jumbo Loan requirements or Home Loans in general, you can chat with our digital assistant, Lydia, or contact one of our Loan Officers.