Depending on the loan amount you need and where you’re buying a home in Louisiana, such as a home in Baton Rouge or in New Orleans, you may find it difficult to find financing beyond the conforming loan limits. If this is the case, you may need a jumbo loan.
What is a jumbo loan?
Jumbo loans in Louisiana are a specialized type of mortgage that allows borrowers to finance higher-priced properties that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These loans are designed to meet the financing needs of luxury homes and properties located in high-cost areas.
If you need to borrow more than the conforming loan limit (CLL), you’ll need a jumbo loan. Louisiana jumbo loans allow you to borrow more money to buy a more expensive home, but they also come with higher interest rates and stricter requirements than conventional loans.
What is the jumbo loan limit in Louisiana?
In Louisiana, the conforming loan limit is $726,200 across all counties. For example, the conforming loan limit in New Orleans is $726,200, so any mortgage that surpasses the loan limit designated for your county by even one dollar is classified as a jumbo loan.
Keep in mind that the loan amount is what determines whether or not you’ll need a jumbo loan, not the price of the home. So, if you were to put $50,000 down on a $750,000 home in New Orleans, the mortgage would be $700,000, which is under the conforming loan limit for this area. In this case, your loan wouldn’t be considered a jumbo loan.
For more information on the conforming loan limit in your county, use the FHFA map.
What are the requirements for a jumbo loan in Louisiana?
As previously mentioned, the requirements for a jumbo loan are much more stringent than a conforming loan. The specific requirements may vary from lender to lender, but below are the typical requirements for borrowers seeking a jumbo loan in Louisiana.
Higher credit score: In order to be eligible for a jumbo loan, lenders generally expect applicants to have a credit score of at least 720. While some lenders may consider a score as low as 660, a credit score of less than that is typically not accepted.
Larger down payment: Obtaining a jumbo mortgage typically requires a larger down payment compared to a traditional mortgage. Lenders may require a down payment of 10% to 20% or more, depending on the specific loan program and the borrower’s financial situation. If you’re approved with a down payment less than 20%, keep in mind you’ll most likely be required to purchase private mortgage insurance (PMI).
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): Lenders consider a borrower’s debt-to-income ratio (DTI) when evaluating their eligibility for a jumbo loan. To qualify for a jumbo mortgage in Louisiana, applicants typically need a DTI below 43%, though closer to 36% is preferred. The DTI represents the borrower’s monthly debt payments divided by their gross monthly income.
Additional home appraisals: Mortgage lenders may require a second home appraisal for a jumbo loan, in addition to the standard appraisal, to get another opinion on the property’s value. This is especially true in counties with limited comparable property sales. The second appraisal helps lenders ensure that they are providing funds for a property that is worth the loan amount or more.