What Are the Qualifications for a Jumbo Loan?
Any loan which does not conform to the government standards set by the Office of Federal Housing Enterprise Oversight for loans able to be purchased, and secured by Freddie Mac and Fannie Mae are called Jumbo Loans. While the Office of Federal Housing Enterprise Oversight, also known as OFHEO, sets this limit size annually it has been relatively stable since 2006 with most reports having it flatlining at around $417,000.
As a Jumbo Loan both exceeds government backing and is a higher principal amount it carries a higher percentage of risk with it and so may have higher interest rates based on lender discretion. Because of these limitations the qualifications for Jumbo Loans can be considered more stringent then a conventional loan.
With this government placed limit of $417,000 anything exceeding this limit is a Jumbo loan, unless the limit has been raised to include the borrowers placement in a high cost area, which may b raise the limit to as high as $625,500 by some reports.
What is Needed to Qualify for a Jumbo Loan?
As the monitoring and scrutinization of a Jumbo Loan will always be higher according to the risk being able to demonstrate the ability to keep up with amortized payments is pivotal. So as to qualify lenders will require proof of income or liquid reserves to cover the payments, namely providing recent pay stubs and tax forms dating back two months and two years respectively, although some lenders may require further investigation.
The Debt to Income Limits must also qualify to the terms set by the Consumer Financial Protection Bureau to apply for a qualified mortgage. This Debt to Income limit cannot exceed 43%. Another qualifying factor for any loan is a credit score, normally for a Jumbo Loan a credit score of at least 680 or to find a lender who specializes in lower credit scores. And while applying may be tougher jumbo loans characteristically have lower down payments but this may be altered along with the credit score.