You’ll need a low debt-to-income ratio (DTI). Get your DTI by dividing your gross monthly income against your monthly debt payments.For jumbo loans, issuers may require a down payment of 15% to 30%. A down payment of at least 20% means you won’t have to pay private mortgage insurance (PMI). You may be able to put down as little as 3% on some conventional loans. Lenders will demand a large down payment.For conventional mortgages, a FICO score of at least 640 may be sufficient. Because this type of mortgage presents greater risk, lenders may demand better credit than on other types of home loans. Lenders require a minimum credit score of 680 to get a nod for a jumbo loan, although some mortgage bankers are more restrictive. Jumbo loan requirements can vary significantly by lender and applicant, but there are clear qualification differences between jumbo loans and conventional loans. Jumbo mortgages can be used for primary homes, second or vacation homes or investment properties, and they are available as both adjustable- and fixed-rate loans.
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That simply means the loan doesn’t conform to Fannie Mae and Freddie Mac lending standards. You might also hear a jumbo loan referred to as a non-conforming loan. The operative word here is “borrow” or “finance”-it’s not the purchase price. Otherwise, the borrower will need to seek a jumbo mortgage loan.Ī jumbo mortgage is a loan designed for a borrower who needs to finance a loan balance greater than conforming loan lending limits. Who Needs a Jumbo Loan?īuyers who don’t meet the Fannie and Freddie loan limit restrictions are either expected to increase the amount of their down payment or find a lender that will offer a second mortgage for the difference so that they can get conforming loans, says Andrina Valdes, COO of Cornerstone Home Lending in San Antonio, Texas. In 2020, the conforming limit is $510,400 in most parts of the U.S., but can be as much as $765,600 in higher-cost regions. The conforming loan limit is adjusted annually. You’ll pay more for a jumbo mortgage than a conventional home loan, and you’ll have to meet tougher qualification guidelines. These loans-meant to finance expensive properties-cannot be purchased or securitized by the government-backed entities Fannie Mae or Freddie Mac, which increases a lender’s risk because it will have to hold onto the loan for longer. A jumbo loan is a mortgage that exceeds the conforming loan limit set by the federal government.
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