How To Qualify For a Jumbo Loan

Written By Rory Arnold

Reviewed By Tom McLean

If you’re in the market for a pricier home, then you may need a jumbo loan.

The good news is that jumbo loans can help you get a mortgage that’s too large to be backed by the federal government. However, because these loans aren’t insured, they pose a higher risk to mortgage lenders. That means jumbo loans often come with stricter eligibility requirements.

If you think you might need a jumbo loan but aren’t sure how to get one — we’ve got your back. Here’s what you should know about how to get a jumbo loan, and how the approval process works.

Jumbo Loan Requirements

Though each lender sets its own jumbo mortgage loan requirements, there are some general criteria you’ll likely need to meet to get one. Here’s how to qualify for a jumbo loan:

Jumbo Loan Requirements

Loan Limits	Up to $1 million to $2 million, though individual lenders set their own limits.
Minimum Down Payment	10%, though many lenders require 20% to 30%.
Minimum Credit Score	680 to 760, depending on the lender.
Maximum DTI Ratio	43% to 45%, but could be lower depending on the lender.
Maximum LTV Ratio	90%, but could be lower depending on the lender.

Credit score

Specific credit requirements vary by lender. As a general rule, a jumbo loan requires a higher minimum credit score than a conforming loan.

So, how good does your credit score need to be to get a jumbo loan? Your lender may require a minimum credit score between 680 and 760, compared to about 620 for a fixed-rate conforming loan.

Debt-to-income ratio

Lenders use your debt-to-income ratio to help determine if you can afford to pay back a loan. Your DTI ratio compares your income to how much debt you have. To calculate your DTI ratio, add up your monthly debt payments and divide the total by your gross monthly income, which is how much you make before taxes and other deductions are taken out.

In general, a lower DTI ratio shows lenders that you have room in your budget to afford the monthly mortgage payment. For a jumbo loan, lenders may require your DTI ratio to be no higher than 43% to 45%, though that number could be lower depending on the lender you’re working with.

Cash reserves

Cash reserves are how much money you have that’s not needed for your down payment and closing costs. Your lender will want to make sure you have enough cash in the bank to cover the first six to 12 months of mortgage payments.

Down payment

If you need a jumbo loan, lenders typically expect you to make a larger down payment than you would for a conforming loan. You’ll likely have to make a down payment of at least 10% to get approved for a jumbo loan, and it’s common for lenders to require a down payment that’s at least 20% to 30% of the home purchase price.

Jumbo Loan Qualification Process

If you think you’re in the right financial shape to take on a jumbo loan, then you’ll find that the process is similar to applying for a conforming loan. Take a look at some of the steps.

Appraisals

Some lenders require a second home appraisal for a jumbo loan to confirm that the loan amount matches the home’s value. This tends to be the case when the loan amount is especially high, and the lender wants to be sure that the house is worth it.

Loan-to-value ratio

Your LTV ratio compares the loan amount with the assessed value of the home, again to confirm that the value justifies the loan amount. Calculate your LTV ratio by taking the loan amount and dividing it by the value of the house. Lenders typically require an LTV ratio less than 90%, though that limit could be lower depending on the lender and your financial situation.

Required documents

To review your finances and assess whether you can afford the loan, your lender is going to require specific documentation. You should be ready to provide the following:

W-2 forms from the last two years.
Pay stubs from the last 30 days.
Tax returns for the last two years.
Bank statements from the last two months.
Proof of any additional income.
Profit and loss statements and balance sheets if you’re self-employed.

Jumbo Loan Costs and Fees

A jumbo loan typically is more expensive than a conforming loan. Not only is a jumbo loan a larger sum of money, but it also comes with higher closing costs. However, even though jumbo loans are riskier for lenders, your mortgage interest rate won’t necessarily be higher than it would be with a conforming loan.

Shopping For a Jumbo Loan

When shopping for a jumbo loan, be sure to get estimates from several lenders to compare rates and terms. A jumbo loan is a bigger commitment than a conforming loan, so you’ll want to make sure you’re getting a good deal.