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What is a Jumbo loan

A jumbo loan may be a mortgage wont to finance properties that are too expensive for a standard conforming loan. The utmost amount for a conforming loan is $510,400 in most counties, as determined by the Federal Housing Finance Agency (FHFA). Homes that exceed the local conforming loan limit require a jumbo loan.

Minimum criteria for applying a Jumbo loan

Underwriting criteria for jumbo loans are stricter because the loans are larger and riskier for lenders.

  • Credit score: Lenders may require your FICO score to be above 700, and sometimes as high as 720, to qualify for a jumbo loan.
  • Debt-to-income ratio: Lenders also will consider your debt-to-income ratio (DTI) to make sure you don’t become over-leveraged, though they’ll be more flexible if you’ve got plentiful cash reserves. Some lenders have a tough cap of 45% DTI, however.
  • Cash reserves: You’re more likely to be approved for a jumbo loan if you’ve got ample take advantage the bank. It’s not uncommon for lenders to ask jumbo loan borrowers to point out they need enough cash reserves to hide one year of mortgage payments.
  • Documentation: To prove your financial health, you’ll need extensive documentation, perhaps quite for a conforming loan. You ought to be prepared handy over your full tax returns, W-2s and 1099s. When applying, additionally to bank statements and knowledge on any investment accounts.
  • Appraisals: Some lenders may require a second home appraisal for the property you’re getting to purchase.

Jumbo mortgage rates could also be slightly above those on conforming loans, counting on the lender and your financial situation. Still, many lenders offer jumbo loan rates that are competitive with rates on conforming loans. A few may even offer slightly lower rates counting on market conditions, so confirm to buy around.