If your loan is more than $484,350, your best option could be a jumbo loan, also known as a non-conforming loan. Jumbo loans allow you to borrow a larger sum of money than a conforming loan. Jumbo loans and conforming loans have many similarities, but there are some key differences you need to be aware of.
Debt-to-income ratio (DTI)
While conforming loans are more lenient on DTI, jumbo loans are not as flexible and have a hard cap of 43% DTI.
You will be required to maintain a credit score (FICO) average higher than 700 to qualify for a jumbo loan.
Depending on your home value, your loan could require two appraisals. This will sometimes occur on loans over $1,000,000 and will always be required on homes with a value of over $2,000,000.
You are more likely to be approved for a jumbo loan if you have ample cash reserves. The general rule of thumb is six months of reserves equal to your new principal, interest, taxes, and insurance (PITI) payment.
In some cases, your interest rate may be slightly higher than those offered on conforming loans. Higher rates occur because jumbo loans are considered riskier for lenders because they are not guaranteed by Fannie (FNMA) or Freddie (FHLMC). The great news is that Texaslending.com offers some of the most competitive jumbo rates in the industry.
To ensure you need a jumbo loan, it is best to consult with a licensed loan officer. The loan limits vary from county to county because some markets are pricier than others. For 2019, the conforming loan limit for a one unit home in most counties nationwide is $484,350. However, in high-cost areas, loan limits for conforming loans can be as high as $726,525.