Get the details on how you can qualify for a larger mortgage loan.
A jumbo loan, also known as a non-conforming mortgage, is a loan that doesn’t conform to the guidelines of Fannie Mae and Freddie Mac. Conforming mortgages meet specific guidelines such as down payment, credit score and loan amount. For 2018, the conforming loan limit is $453,100 in most areas of the country and loans that go over that amount are considered jumbo loans. In more expensive locations like larger counties around NYC and in many areas of California, for example, jumbo loans start at over $679,650. Here’s what you need to know about jumbo loans.
What are the benefits of a jumbo loan?
The main benefits of a jumbo loan is that it allows you the opportunity to borrow more money to purchase a more expensive property. You can also get a jumbo loan in a fixed or adjustable rate.
How do I qualify for a jumbo loan?
To get a jumbo loan, there are stricter requirements than with conventional loans. Here are some of the qualifications you need to get approved for a jumbo loan.
- Good credit score. For these types of loans, a FICO score of at least 700 or higher is needed. You’ll also need to show proof of income and provide financial details that can support your ability to pay a higher mortgage amount.
- Debt-to-income ratio. For jumbo loans, the maximum debt-to-income ratio is lower than conventional loans at about 40%, but that can vary by lender and your mortgage amount. Lenders want to ensure you can pay your living expenses and your mortgage payment each month.
- Cash in the bank. Lenders want to see that you have cash available to cover your mortgage payments. Some lenders may want to ensure you have a year’s worth of reserves to cover the principal, interest, taxes and insurance.
- Appraisal. The property must be appraised near the amount of the purchase price of the property.
- Down payment. You’ll need to make a down payment of at least 20% to purchase a home with a jumbo loan.
- Proof of income. You’ll have to provide supporting documents such as pay stubs and W2 forms to show your income.