Do You Qualify for a Jumbo Mortgage?

If you are planning on purchasing a large house in the future, you may need to utilize a jumbo mortgage. Here are the basics of jumbo mortgages and how you can qualify for one.

Jumbo Mortgages

As the name implies, jumbo mortgages are mortgages that are considered very large. Any mortgage that is larger than the normal loan limits for Fannie Mae and Freddie Mac could be considered a jumbo mortgage. As of April 2010, if you need a mortgage of $417,000 or more, this will be considered a jumbo mortgage.

Credit Score

One of the most important criterion in qualifying for a jumbo mortgage is a good credit score. Since you are dealing with a loan that is large compared to other mortgages, the lender is going to be stricter when it comes to credit scores. They do not want to work with those that would be considered questionable borrowers. Every lender is going to have differences when it comes to a minimum credit score that they would be willing to work with. As a general rule, you are going to need a credit score of at least 640 before you can be in the running for a jumbo mortgage. If you have a credit score of 680 or more, this is going to increase your odds of qualifying for a jumbo mortgage.

When it comes to determining your credit score, the lender is going to look at all three of your credit reports from the major credit bureaus. They are going to look at the middle score and use this as your credit score for their purposes. Therefore, you cannot look at the best one of the three credit scores when determining what your credit score is.

Income Requirements

Another important part of qualifying for a jumbo mortgage is your income. Taking out a jumbo mortgage is a very large financial responsibility. Thus, you are going to have to have a larger-than-average income in order to support this payment. Every lender will have different income requirements when it comes to approving you for a jumbo mortgage. The lender is going to look at your debt-to-income ratio and determine if you are a potentially good borrower to work with. You will have to be able to pay for the principal, interest, taxes and insurance on the mortgage comfortably in order to qualify.

Down Payment

In most cases, you are going to need to come up with a sizable down payment in order to get a jumbo mortgage. There are very few programs out there that will offer 100 percent financing for a jumbo mortgage. In the majority of cases, you should expect to come up with at least 5 percent of the value of the home as a down payment. You might be required to come up with as much as 20 percent of the value depending on the lender.