As far back as 2013, the Chicago Tribune published a piece about Jumbo mortgage in the city. The summary of that article: you can afford an expensive home with jumbo loans. When jumbo mortgage loans first began, the housing market didn’t pay too much mind to it. They were expensive. But now, more lenders are offering flexible housing packages on terms which are, more or less, the same as inferior homes.

What’s a Jumbo Mortgage?

Also known as a non-conforming mortgage, a jumbo loan is a loan for prospective homeowners who need loans that exceed their preferred area’s limit. Confused? Well, it’s like this.

Every housing area has their conforming loan size limit. In higher priced markets, this could be anything from $420,000 to $730,000. Chicago dwellers patronise jumbo mortgage because so many homes in the greater Chicago area are on the expensive side. Jumbo loan presents itself as a conventional home loan with fixed or adjustable terms that exceed the limits of conforming loans.

What are Jumbo Loan Rates? In previous years, jumbo loan rates exceeded those of conforming rates with huge margins. This discouraged a lot of homeowners from taking up jumbo loans. Today, however, jumbo rates are either equal or slightly higher than conforming loan rates. This is due to lenders are becoming more flexible with home packages. Keep in mind that jumbo loan rates vary from state to state and from lender to lender.

What are Jumbo Mortgage Requirements?

Just like conforming loans, jumbo loans have an application and evaluation process. A lot of scrutiny will be placed on your credit score, employment history, current debt, debt-to-income (DTI) ratio, down payment amount and many more. The important requirements are:

• Must have minimum credit score of 680—a higher credit score means better terms and rates.

• Must how two years of stable employment history

• Assets must be verifiable during underwriting

• Source of down payment and cash reserves must be transparent

How to Qualify for a Jumbo Loan?

The weight of a jumbo loan makes it harder to qualify for than conforming loans. All factors involved are scrutinised thoroughly. Unlike other loans, the government does not actively involve itself in the process. This makes lenders uptight and more financially conscious. You need to polish the following:

1.Credit score: A standard jumbo loan requires a minimum of 680. Lenders prefer 700 to 720 however.

2. Debt to Income Ratio: Jumbo loans have low DTI ratios. Usually, a jumbo loan is an expensive loan. A high DTI ratio would make them hard to repay. Expect to see a DTI limit of 43-48%.

3. Reserves: Most jumbo mortgage lenders expect applicants to have tangible cash reserve from the housing expense. Depending on the lender, you’ll need a cash reserve of about 3 to 24 months.

4. Down Payment: A 20% down payment is the standard. Some lenders may accept lesser.

Benefits of a Jumbo Mortgage

• You can get a jumbo loan with a 43% DTI; higher than conforming loans

• Less income calculators compared to conforming loans

• Homeowners can pay less than 20% down payment, although DTI may lower as a result

• No mortgage insurance