Jumbo Loans: What Are They?
If you’re shopping for a higher-end home such as one in a more expensive housing market area in the US, you’re going to need a larger loan amount than a conventional, conforming loan will allow.
We’re sure you have heard of the many different types of loans, such as a refinance, FHA, and even a conventional loan. A conforming loan conforms to financing limits set by the Federal Housing Finance Agency.
However, when you are purchasing a higher-priced home, your loan will be referred to in the industry as a Jumbo loan. Jumbo loans exceed the conventional loan limits and underwriting guidelines set by Fannie Mae and Freddie Mac. This makes a Jumbo loan a non-conforming loan.
In 2021, the conforming loan limit is $548,250 in most counties in the US and $822,375 in higher-cost areas. Any mortgage over these amounts will be considered a Jumbo loan.
Whether or not you need a Jumbo loan is determined by how much financing you will require and not by the property’s purchase price. What are typical Jumbo loan requirements? Here are a few examples:
- Debt-to-Income Ratio: The lower the better, especially for a Jumbo loan.
- Credit Score: The minimum required for a Jumbo loan depends on the mortgage lender, but is usually at 700 or above. In comparison, conforming loan credit scores are typically around 620 to 640.
- Down Payment: The minimum on a Jumbo loan also varies by lender, DTI, Credit Score, and other factors.
Minute Mortgage has options for well-qualified Jumbo loan buyers. Not sure which type of mortgage you need? Our team of experienced Loan Officers is ready to answer your questions and guide you to the mortgage type that’s best for you.