Jumbo Loans

Jumbo Loans Are Good For:

Jumbo loans are best suited for borrowers with strong financial profiles who need to finance high-cost homes that exceed conforming loan limits. These loans are typically reserved for high-income earners, individuals with excellent credit, low debt-to-income ratios, and substantial cash reserves to cover larger down payments and closing costs.

What is a Jumbo Loan?

A jumbo loan is a mortgage that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA), meaning it cannot be purchased by Fannie Mae or Freddie Mac due to its size.

How does a Jumbo Loan work?

The primary advantage of a jumbo loan is that it allows borrowers to take out a mortgage that exceeds the limits put in place by the FHFA. This limit varies by state—and even by county. The FHFA sets the conforming loan limit size for different areas on an annual basis. The limit for 2023 is set at $726,200 for most of the country. This is an increase of $79,000 from the 2022 limit of $647,200. For counties that have higher home values, the baseline limit is set at $1,089,300, or 150% of $726,200.

What are jumbo loan requirements?

The process of obtaining a jumbo loan is similar to other mortgages, beginning with preapproval from a lender, followed by house hunting and a formal underwriting process to verify financial details. Because jumbo loans are larger and riskier for lenders, they are often manually underwritten, meaning a human expert reviews the borrower’s credit history, assets, bank statements, and income to assess affordability. Lenders typically require higher credit scores and lower debt-to-income (DTI) ratios, usually 45% or less, to ensure the borrower can manage the higher payments.

The specific loan limits and requirements can vary by lender and location, so borrowers should consult with a mortgage professional to determine eligibility and available options.