Are you planning to buy a luxurious condo in Florida or a home in a high-priced neighborhood this year? If so, you might be wondering what a jumbo loan is and whether it’s right for you.
What is a jumbo loan?
Simply put, a jumbo loan is a type of mortgage loan that’s used to finance loans that exceed the conforming loan limit. In the United States, the Federal Housing Finance Agency (FHFA) sets loan limits for conforming loans each year.
If the home you’re purchasing will require you to borrow more than the conforming loan limit (CLL), you’ll need to apply for a jumbo loan. But because of the larger loan amounts and increased risk for lenders, Florida jumbo loans often come with higher interest rates and stricter requirements than conventional loans. For instance, a larger down payment and a higher credit score may be required to qualify for a jumbo loan.
What is the jumbo loan limit in Florida?
In 2023, the conforming loan limit for most U.S. real estate markets is $726,200. However, the jumbo loan limit in Florida depends on what county you’re planning to buy a home in.
- $726,200 is the conforming loan limit in most Florida counties
- $874,000 is the maximum limit in higher-cost counties
As a reminder, the amount being borrowed is what determines whether or not you’ll need a jumbo loan, not the price of the home. So, if you were to put $100,000 down on a $780,000 home in Palm Beach County, the mortgage would be $680,000, which is under the CLL for this area. In this case, your loan wouldn’t be considered a jumbo loan.
The following counties in Florida have a conforming loan limit beyond $726,200 for 2023:
FHFA Conforming Loan Limit
Additional information regarding the conforming loan limits in Florida can be found here.
What are the requirements for a jumbo loan in Florida?
As previously mentioned, the requirements for a jumbo loan are much more stringent than a conforming loan. Each lender may have different requirements or processes, but below are the typical requirements for borrowers seeking a jumbo loan.
Higher credit score: When it comes to obtaining a jumbo loan, credit score requirements are typically more strict than for conventional mortgages. While some lenders may be willing to accept a lower score, a credit score of at least 720 is generally required to qualify for a jumbo loan. It’s important to have a strong credit profile and a solid financial history to increase your chances of being approved for a jumbo mortgage.
Larger down payment: When applying for a jumbo loan, keep in mind that down payment requirements are generally more substantial than for traditional mortgages. While the specific amount will depend on the lender and the borrower’s financial situation, many jumbo loan lenders require a down payment of at least 10%, and some require as much as 20% or more.
More assets: During the asset review process, lenders typically request that jumbo loan borrowers provide evidence of sufficient liquid assets or savings to cover the equivalent of one year’s worth of loan payments.
Lower debt-to-income ratio (DTI): Whether you’re applying for a traditional mortgage or a jumbo loan in Florida, lenders evaluate your spending habits and creditworthiness by analyzing your debt-to-income ratio (DTI). The DTI is determined by dividing the total of your monthly debt payments by your gross monthly income. While some lenders may accept a DTI as high as 50% for a conforming loan, those applying for a jumbo loan should aim for a DTI under 43% and ideally closer to 36%.
Additional home appraisals: For a jumbo loan, lenders may require a second home appraisal to ensure that the property’s value is accurate. This is particularly true in places where there are few comparable home sales. The additional appraisal acts as a second opinion and helps the lender to mitigate their risk. It’s important to note that the cost of a second appraisal may be higher than a typical home appraisal, particularly in areas with fewer sales.