A jumbo loan, also known as a jumbo mortgage is used for financing properties that exceed the conventional loan limit. The limit is set by the Federal Housing Finance Agency (FHFA).
The limit set by this association in the year 2023 is;
Conventional loan > $726,200
Anything exceeding this limit is characterized as “Jumbo Mortgage.”
Qualifying for a jumbo mortgage is considerably more challenging than conventional loans due to higher amounts. This also involves a stricter, more vigilant writing and document criteria to ensure transparency and compliance to law and tax regulations during repayment periods. This also helps create legal boundaries and reduces risks of miscommitment.
This blog will specifically talk about the conditions that will preferably increase the chances of qualifying for a jumbo mortgage.
Eligibility Criteria for Jumbo Mortgages
Credit Score:
Lenders usually look for a higher credit score for jumbo mortgages. A credit score of 700 or above is favorable for a party to qualify for a jumbo mortgage.
Debt to Income Ratio:
A lender checks for a stable debt to income (DTI) ratio to ensure comfortable paybacks. This can be flexible and may vary from multiple lending parties. One hypothetical example of a DTI hard cap can be 35%.
Bank Statement:
For any financial activity that involves more cash, lenders usually look for bank statements and records. In case of qualifying for a jumbo mortgage, you must have a higher cash reserve in your bank.
Down Payment:
A higher down payment is required as a prerequisite to jumbo loans. While conforming loans can settle up to 2-3 percent down payment of the total loan; jumbo mortgages require a handsome amount of 20% or more.
Documentation:
A jumbo loan deals with hefty amounts. Thus, it requires extensive documentation as compared to conventional loans. This is to ensure commitment, transparency and a responsible lending process. This also helps mitigate risks of fraud.
A proper documentation, as per the requirement of a lender or mortgage broker can significantly increase the chances of qualifying for a jumbo loan.
Proof of Income:
A proof income is required for proving a consistent and reliable source of income which is necessary for qualifying for a jumbo mortgage. This helps the lender to gauge an idea of incurring liquid cash.
Secure Your Dream Home with Us!
Jumbo mortgage is a private financial funding that is given to secure homes with steep prices. While this amount exceeds conventional loans; the eligibility criteria is more stringent including a higher credit score, down payment, and debt to income ratio.
If you are looking to make the best of all portfolios in order to qualify for a jumbo mortgage loan, what better way than contacting Red door Funding on (832) 539-1099. We are located at 110 Avenue B, Suite 100, Stafford, TX 77477. Contact us to sort all your financial queries in your favor!