The key difference between a Jumbo mortgage and a Conforming loan is the size of the loan. A Jumbo loan is a mortgage used to finance properties that are too expensive for a Conforming loan. The current amount for a conforming loan is $548,250 for most counties and in some high-cost counties, it’s as high as $822,375. Homes that exceed their local conforming loan limit require a Jumbo loan. Jumbo loans typically feature a limit of up to $2,500,000.
Jumbo loans are typically available with either a fixed interest rate or an adjustable rate, and they come with a variety of terms. Generally speaking, underwriting criteria for jumbo loans are stricter because the loans are larger and riskier for lenders.
Most lenders currently require a FICO score of at least 700 (and sometimes as high as 720) to qualify for a jumbo loan. However, Bluefire Mortgage Group is offering Jumbo programs now starting at a credit score of 680. Some restrictions may include income and loan amount limits, as well as higher rates.
Mortgage lenders will also consider a borrower’s debt-to-income ratio to ensure that the borrower doesn’t become over-leveraged with a payment that they can not afford. Usually, the cap is around 45%, though they may be more flexible if you have an ample amount of cash reserves. It’s not uncommon for lenders to ask jumbo loan borrowers to show they have enough cash reserves to cover one year of mortgage payments.
As far as documentation goes, a borrower should be prepared to hand over their full tax returns and income documents when applying, as well as bank statements and information on any investment accounts.
Jumbo loans typically require a down payment of at least 10% and there are some additional qualifying steps. Borrowers can also expect higher costs at the closing table, as well as possibly higher rates.
If you have any further questions about Jumbo Loans or the market in general, we are happy to help you! Please call us at (760) 930-0569 and one of our loan officers will assist you.