What are the qualifications of a jumbo loan?

Jumbo loans are a little different than the norm. This type of mortgage goes beyond conforming loan limits set by the Office of Federal Housing Enterprise Oversight.

Their loan limits cap the dollar value on loans backed by government-sponsored programs. You won’t find these mortgages under the Freddie Mac, Fannie Mae or FHA box.

The limits on these loans are associated with local media home values.

How to Qualify for a Jumbo Loan?

These loans go through the same approval formula as a standard loan, but they are harder to obtain.

The documentation requirements frequently surprise borrowers during the process as the lenders get granular in their assessment of their qualifications. Lenders set their own eligibility criteria, and credit issues can quickly disqualify them.

The credit score requirements for a jumbo loan are much different as well. The credit score should be at least 680. In many cases, the credit score must be 700 or better.

The debt-to-income ratio may be lower than a conforming loan, but it may open the door to a more expensive loan. The DTI limit of 43 to 45 percent or lower applies for qualified jumbo rates.

Lenders also look for cash reserves. It’s best to have money in the bank, but a gift or business funds can often be used to meet this requirement.

If you have a high down payment, you may be able to circumvent this requirement. You may also be required to put down 20 percent, although there are some instances where the down payment is lower.

For borrowers who do not want to pay private mortgage insurance, they can take out a piggyback loan, or a second mortgage.