In many areas of the country you can find a great single family home for less than $250,000. In other areas of the country, that’s what you’ll need for a down payment on the home of your dreams. In those areas where the cost of living, and the cost of housing, is higher than average, many home buyers will need to take out a jumbo mortgage loan in order to purchase property.
What is a jumbo loan mortgage?
A jumbo mortgage loan is a home loan for an amount that exceeds what’s known as the “conforming” mortgage loan limits set by housing regulators. The “conforming” mortgage loan limits are set by the Housing Finance Agency, a federal agency which oversees both Fannie Mae and Freddie Mac. Jumbo loans are not for unlimited mortgage amounts though – they do have caps. Jumbo loans cannot exceed $721,500 in some select areas like Alaska, Hawaii and the US Virgin Islands; however in most areas of the country jumbo loans cannot exceed $625,500.
What do I need to do in order to qualify for a jumbo mortgage?
In order to qualify for a jumbo loan, a prospective buyer will go through much of the same paperwork as they would with a more traditional conventional mortgage. Some jumbo loan lenders will require two appraisals versus the standard single appraisal, and most jumbo mortgage loan lenders will be looking for higher than average credit scores and low debt-to-income ratios. While you can fairly easily qualify for a more traditional mortgage product with a credit score in the 600-range, you’ll likely need a score well above 700 to qualify for a jumbo loan.
Additionally, most jumbo loan lenders will require that prospective buyers have a certain amount of cash reserves on hand to cover the mortgage payment and will require a fairly hefty down payment. The typical down payment on a jumbo mortgage loan might be as low as 15%, but may exceed 30% or more of the total price of the home. As you can see, jumbo loans are not for the average home buyer who simply wants to purchase a larger home. Jumbo loans will require that the buyer have large amounts of liquid assets, cash, on hand to complete the real estate transaction.