Jumbo mortgage loans are the non-conforming loans which exceed the maximum amount that is set as the conventional loan limit. The government-sponsored enterprises GSE, Fannie Mae, and Freddie Mac, set these limits on the maximum loan amount for any conforming loan. The set maximum loan amount for the conventional loan is $453,100. Any loan that surpasses this amount is classified as a non-conforming jumbo loan.
Jumbo Loan Limits
According to the Federal Housing Finance Agency, FHFA, the breakdown of the new jumbo loan limits effective from January 1, 2018, is as follows:
- One hundred eight counties have loan limits of $679,650 for one-unit properties. These counties are considered the highest cost-housing market regions and include Los Angeles, San Francisco, and New York City.
- 2,916 counties remain at $453,100
- 115 counties are between $679,650 to $1,019,475. These regions are considered to have higher than normal prices. For property located in Hawaii, Alaska, US Virgin Islands, and Guam, the set loan limit is $1,019,475. The maximum loan limit for property in other areas is $679,650.
Jumbo Loan Credit Requirements
The jumbo purchase loan is considered differently compared to the conventional loan. This implies that the credit score requirement is higher, with a minimum of $680 middle credit score being a must. The average jumbo mortgage borrowers have a middle FICO score of 740 and above.
This is another requirement that is looked on a personal basis as the situation of jumbo loans borrowers vary from individual to individual. However, at a minimum, a jumbo loan borrower will be required to have 10% down payment. In most cases, 20% is a requirement to qualify for the jumbo purchase loan. However, depending on the type of property being bought and the borrower’s situation, some can be required to raise 25-30% down payment.
Asset and Reserve Requirement
This requirement is very different from conventional loans. Asset reserve is normally defined in terms of the interest, taxes, Insurance (PITI) payment, and monthly principal. A month of the reserve is the same as one month of PITI payment. The asset reserve requirement for the jumbo purchase loans will vary from a minimum of 6 months to a number of years’ worth of reserves. This will depend on the situation of the borrower and how significant the loan amount is. The six months is the basic rule, but it is not uncommon for lenders to require borrowers 12-24 months in asset reserve. The borrower will be required to document all the asset reserves and the more money in the reserves, the higher the chances of getting approved for the Colorado jumbo purchase loan.
The interest rates for the jumbo purchase loans are almost at all times an adjustable rate mortgage ARM. The fixed rate jumbo loans are rare and higher than the traditional loans. In most cases, borrowers on the jumbo purchase loan will get a 5, 7 or 10-year ARM where they will sell the house before the loan matures. Most borrowers prefer the adjustable mortgage loan because they do not plan to stay in the house for a long time.
- Jumbo purchase loans require a larger down payment in most cases
- Higher credit scores are required
- Lower debt-to-income, DTI ratios are required
- Higher rate compared to conforming loans
- More reserves (emergency funds) are required
The Colorado Mortgage Pros offers jumbo purchase loans with the best rates and low cost to the borrowers. Our jumbo purchase loans in Colorado are easier to qualify and competitive compared to the big banks. We open our doors to all people requiring jumbo loans, and for more information about our Jumbo purchase loans in Colorado, contact our home loan experts today.