Determining whether or not your loan is jumbo or conforming may seem confusing; which is why, we have crated this blog post as an educational resource.
It simply boils down to: the type of loan (FHA or Conventional), your county's limit and the type of property you are purchasing or currently own. For example, a non-FHA loan limit for a single family home, or condo, in Collier County, FL is $448,500 and in Monroe County, FL is $529,000 yet, all other counties in Florida the limit is $417,000. The reason for this difference is some, more affluent, counties have higher limits as a consequence of average home prices and land value being more costly.
Conforming or Jumbo. Which one are you?
You’ll need to first determine the type of financing (FHA or Fannie Mae/Freddie Mac. FHA and Fannie Mae/Freddie Mac have set different loan limits so you’ll need to use the proper resources when checking local loan limits.
FHA loan limits. Simply enter your state, county and hit send at the bottom of the screen. You’ll be given the loan limits for your county along with the loan limits for each property type within your county.
Fannie Mae/Freddie Mac loan limits. While this is Fannie Mae’s site, both Fannie Mae and Freddie Mac rarely move independently of one another. The charts will offer the loan limits for each property type; however, does not provide detailed information regarding high-cost counties.
Conforming and Jumbo Loan Underwriting Differences
Conforming lending rules are more flexible than jumbo – from the required credit score to the down payment. With regard to jumbo lending, guidelines are more stringent, and with good reason, lenders are taking more risk. Additionally, you’ll find jumbo loans will require higher credit scores and larger down payments.
Conforming
Conforming Programs and Rates. Conforming loans offer more competitive rates and offers both ARMs and Fixed rate programs.
Conforming Credit. You will need to have a minimum credit score of 620.
Conforming Income. All types of income can be used when qualifying for a conforming loan. Speak with your mortgage professional should you have questions about your earned income.Conforming Assets. The lender will want to see two to three months savings (reserves). One month’s reserve is the equivalent to one full month’s mortgage payment (principle, interest, taxes and insurance).
Conforming Debt. The lenders use debt-to-income ratios to qualify you. Conforming guidelines (rules) are more flexible and you can be approved above the suggested debt-to-income ratio. Just keep in mind, your gross income is used when determining whether or not you qualify so be sure you are comfortable with your monthly payment.
Conforming Property Appraisal. Only one appraisal is required.
Jumbo
Jumbo Programs and Rates. The rates for jumbo loans are less competitive than conforming loans. Additionally, adjustable rate mortgages are most commonly used in the jumbo arena. While fixed rates are offered, the rates are about half-percent higher than that of a conforming loan.
Jumbo Credit. The minimum credit score for a jumbo loan is 700.
Jumbo Income. Just as with conforming loans, All types of income can be used when qualifying for a conforming loan. Speak with your mortgage professional should you have questions about your earned income.
Jumbo Assets. In addition to the down payment and closing costs, a jumbo lender will want to see a minimum of twelve months reserves (remember, one month reserve = one mortgage payment).
Jumbo Debt. As with conforming loans, jumbo lenders use debt-to-income ratios for qualification purposes. Jumbo guidelines (rules) are not as flexible. For example, a conforming lender may approve your loan at forty-five percent; however, some jumbo lenders will limit you to forty percent.
Jumbo Property Appraisal. Depending on your loan amount, you may be required to pay for two appraisals.
When researching your financing options be sure and talk with your mortgage professional regarding all of your available options.
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