Key Features of Jumbo Loans

Lenders generally have tougher criteria for approving jumbo loans compared to conforming loans:

Credit Score: Most lenders require a credit score of at least 700, with some preferring 720 or higher for jumbo loans. Conforming loans can sometimes be approved with scores as low as 620.

Down Payment: Jumbo loans typically require a down payment of at least 10-20% of the home’s value, with some lenders asking for 30% down or more. Conforming loans allow down payments as low as 3%.

Debt-to-Income Ratio (DTI): The maximum allowable DTI for jumbo loans is usually capped at 43% or lower, compared to 50% for some conforming loans.

Cash Reserves: Lenders often require 6-12 months’ worth of mortgage payments in cash reserves for jumbo loans to ensure borrowers can cover payments if their income is disrupted.

Property Appraisals: Two professional appraisals may be required for jumbo loans on high-value properties to accurately assess the home’s value.

Advantages of Jumbo Loans

– Allow borrowers to finance higher-priced, luxury properties
– Potentially lower interest rates than other non-conforming loans
– No mortgage insurance required with 20%+ down payment

While jumbo loans have stricter requirements, they provide a path to homeownership for those purchasing higher-end properties that exceed conforming loan limits in their area. Working with an experienced lender is advisable when seeking a jumbo mortgage.