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Requirements for a Jumbo Loan

Jumbo loans allow for larger purchase prices, but some may require buyers to meet more criteria to qualify. Use our jumbo loan guide to see if you could qualify for a larger mortgage.

Conventional mortgage loans can be either conforming or non-conforming. Conforming loans are those that adhere to the guidelines set by Fannie Mae and Freddie Mac, two of the largest purchasers of mortgage loans. Conforming loans have conforming loan limits based on the area. In 2020, the conforming loan limit for a one-unit, single-family home is $510,400. In high-cost areas, the loan limit is $765,600 for a one-unit, single-family home. If you need a mortgage over the conforming loan limit, you’ll need to get a non-conforming or jumbo loan.


What is a Non-Conforming Jumbo Loan?

In 2020, a jumbo loan is a mortgage loan that exceeds the conforming loan limit for an area. These loans are considered “non-conforming” because they aren’t guaranteed by Fannie Mae or Freddie Mac due to their higher risk.

You’ll need a jumbo loan even if a home’s purchase price is a $1 more than the conforming loan limit. Jumbo loans are sometimes referred to as portfolio loans. Since these loans don’t adhere to the government’s conforming limit—and aren't backed by Fannie Mae or Freddie Mac—lenders who approve jumbo mortgages often keep these loans as part of their portfolio, rather than sell them off.

Credit Score Requirement for a Jumbo Loan

Since jumbo loans are a riskier product for mortgage lenders, getting approved will require a high income and an exceptional credit history. Each lender sets their own minimum credit score requirement for a jumbo loan. In most cases, though, you’ll need a FICO credit score of at least 700. Also, the lender may require a debt-to-income ratio (DTI) no higher than 38%, although you may be allowed a DTI up to 43% if you have a large down payment.

Jumbo Loan Limits

Understand, though, there is no specified loan limit for a jumbo loan. Each lender sets their own maximum. One bank or mortgage company may limit its jumbo loans to $1 million, whereas another might limit its jumbo loans to $2 million. The amount you’re able to borrow, however, will depend on your income, current debts, credit report and down payment.


Down Payment for Jumbo Loans

While conforming mortgage loans may only require a down payment between 3% and 5%, jumbo loans require larger down payments. So don’t be surprise if you’re asked to put down at least 20% or 30%.

Some lenders may allow a down payment as low as 5% or 10%. In this case, you would likely agree to a higher interest rate to help offset the risk. Also, if you get a jumbo loan with less than 20% down, you're required to pay private mortgage insurance (PMI).

Along with needing enough cash for a down payment and closing costs, some lenders require cash reserves for jumbo loan programs. You may need three months worth of monthly payments in the bank at closing, in the event of a job loss. Be prepared to provide copies of your bank statements.

Get Started on Your Jumbo Loan

If you’re looking for a property in a pricier area, a jumbo loan can provide the financing you need. However, it’s important to understand how jumbo loans work before applying. To learn more about non-conforming loans, contact one of our experienced loan officers.

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