A jumbo loan is a loan exceeding the conforming loan limit  set by the Federal Housing Finance Agency (FHFA). This year, in most parts of the country, that limit is $484,350. If you are looking for a large home or a home in a pricier area, a jumbo mortgage may fit your financing needs. You’ll need to be aware of some of the requirements you need in order to qualify for the jumbo loan.  

Credit Requirements for a Jumbo Loan

While your credit score and credit report are a crucial staple to qualify for any financing product, due to the increased dollar size of jumbo loans, there are higher standards and minimums for credit. Minimum credit scores may be higher than those for conforming loan balances; some lenders require at least a 720. This is much higher than other, government-backed mortgages. In addition to the score, lenders will also analyze your credit report to confirm payment history, as well as your ability to manage your finances.

Income Requirements for a Jumbo Loan

As the purchase price for your home increases, your income will play a significant role in evaluating your ability to repay the loan. In order to qualify for a jumbo loan, you may need to provide additional documentation of your proof of income. Your debt-to-income ratio is strongly considered. A common debt-to-income ratio for this type of loan is in the 38-43% range. This means that your mortgage payment, in addition to your other monthly liabilities, cannot exceed more than 43% of your net income.

Down Payment Requirements for a Jumbo Loan

Most conforming government loan programs and conventional mortgages do not require a buyer to put a 20% down payment on their house and allowing them to purchase private mortgage insurance to cover the risk of default instead.  However, for jumbo loans, investors typically require a  20%  down payment regardless. The down payment requirement helps to offset the risk of financing expensive homes, which can fluctuate in value.

Cash Reserve Requirements for a Jumbo Loan

Another unique requirement for a jumbo loan is having cash reserves on hand. Many lenders will require you to prove that you have six to 12 months of mortgage payments set aside. At least half of that amount will need to be liquid. 

These are four requirement that are typically required to obtain a jumbo loan.  Working with a knowledgeable, experienced loan officer can make this process much easier. For over 90 years, the experts at Standard Mortgage (NMLS#:44912) has been helping customers obtain financing for their home.