What is a jumbo loan?
A jumbo loan is, essentially, another name for a non-conforming mortgage, which are loans that do not conform to requirements set by major mortgage loan companies Freddie Mac and Fannie Mae. Jumbo loans usually require a higher down payment than conventional loans.
These loans exceed loan limits set by the government, and if you are purchasing a property that calls for a loan higher than the local limit, this is the only time you would need to consider taking out a jumbo loan. When a loan amount exceeds the acceptable limit to be considered as ‘conforming’ to Fannie Mae and Freddie Mac guidelines, it is considered a Jumbo Loan.
Qualifying for a jumbo loan is very similar to qualifying for a conforming loan. Lenders take monthly income, monthly expenses, excess cash, and credit scores into account when deciding if a borrower qualifies.
Generally if your credit score sits at 700 or higher and you have 6 to 12 months in reserve, you will fit the requirements to qualify for a jumbo loan. For individuals looking to take out a jumbo loan, proof of a substantial income will also be necessary.