What is a jumbo mortgage? A jumbo mortgage is a home loan with an amount that exceeds conforming loan limits imposed by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that buy mortgages from lenders. The limit is $417,000 in most parts of the United States but is $625,500 in the highest-cost areas and in-between in others.
Qualifying for a jumbo mortgage
While the underwriting process for jumbo mortgages is similar to that of a conforming mortgage, the requirements differ.
There is no (private mortgage insurance) with a jumbo mortgage, so the down payments are larger and, usually, the credit score can be no lower than 700.If you are going to apply for a larger mortgage amount, of course you're going to have to be able to show the income and the assets in order to pay that.
The maximum debt-to-income ratio for jumbo loan borrowers is 45 percent. Additionally, jumbo borrowers need at least six months' worth of reserves in their bank accounts after closing, while conforming loan borrowers may be required to only have one or two months' worth of mortgage payments set aside. The required reserve amount for jumbo borrowers can sometimes be 20 percent of the loan.