Jumbo or non-conforming loans are mortgages that exceed the conforming loan limits by just one dollar in the specific county you plan to buy a property. These loan limits are subject to annual adjustments and vary based on the location. Therefore, it’s crucial to determine the applicable jumbo loan limit in your county. To gain more information about jumbo loans, please watch this video.
Jumbo loans have distinct guidelines and requirements compared to conforming loans. It’s essential to stay well-informed and prepared when considering this type of financing. For instance, borrowers may be required to have more than a month’s worth of mortgage payments in reserve. It is an extra risk-reduction tool for lenders, ensuring borrowers have sufficient resources to meet their mortgage payments in case of unforeseen financial troubles. You may also need many favorable tradelines and a careful credit management track record to qualify for a jumbo loan.
Lenders prefer borrowers with many active trade lines, a solid credit history and a good debt-income ratio (DTI). The ratio compares total monthly debt payments viz a vis gross monthly income. According to Investopedia, a good DIT is less than 43%, but most lenders prefer 36% or less because they will likely make their mortgage payments on time. In a nutshell, jumbo loans help you get more funding to finance your dream home.