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A jumbo loan is a single option with higher loan amounts than a conventional loan.

Higher financing option: If you’re looking at high-value properties, you could end up having to take out multiple conventional loans to finance your dream home.

Before you start the process, consider the pros and cons of taking out a jumbo mortgage. If you’re looking to buy a high-value home, you might consider a jumbo loan. If you put down less than 20%, you’ll have the added cost of private mortgage insurance (PMI) included in the monthly mortgage payment. Though down payment requirements can vary, jumbo lenders typically ask for 10% to 15% down payment, but some may expect you to put down 20% or more. Lenders also want to see any non-liquid asset ownership, which can include other real estate properties. To qualify, the borrower should be able to provide proof of cash reserves or liquid assets to pay for up to a year's worth of mortgage payments.

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Expect to provide at least two years of W-2s and tax returns, plus recent bank and investment statements. With a larger loan amount comes a bigger monthly mortgage payment and more scrutiny by lenders to ensure you can cover the mortgage. While conventional lenders want to see at least a 620 credit score, most jumbo lenders expect a credit score of 700 or higher. Some lenders prefer a DTI around 36%, which can give you more loan options and better terms. Jumbo lenders still must comply with qualified mortgage guidelines set by the Consumer Financial Protection Bureau (CFPB), however.īorrowers should have a debt-to-income (DTI) ratio of 43% or lower. How does a jumbo loan work?Ī jumbo loan works similar to a traditional mortgage, but with more stringent credit requirements compared to a conventional loan. There are more strict guidelines to qualify for a jumbo loan, which is primarily used to finance high-value properties and homes in highly competitive markets.

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For 2023, the maximum limit for a conforming loan is $726,200 in most states, but can be as high as 150% more, or $1,089,300, in counties and territories with high costs of living.įannie Mae and Freddie Mac do not guarantee, purchase, or secure jumbo mortgages. A jumbo loan is a nonconforming mortgage loan that exceeds the Federal Housing Finance Agency (FHFA) maximum limit.