Many buyers are surprised to learn that Jumbo mortgages really aren’t much different than regular conventional loans when it comes to getting approved. Much of the approval process depends on a handful of critical factors like credit score, down payment, and debt ratios. Let’s discuss the main components of Jumbo mortgage approvals and how it compares to conventional loans.
What is a Jumbo Loan?
First, let’s define what a Jumbo loan is. A Jumbo loan is a type of mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac. These limits are put in place to regulate the size of mortgages that can be purchased or guaranteed by these government-sponsored entities.
The main difference between a Jumbo loan and a traditional loan is the amount being borrowed. In most states, the 2025 Conforming loan limits is $806,500 for a 1-unit single-family home. However, residents in many areas of coastal California, Colorado, Utah, DC, North East have limits all the way to $1,209,750. Anything above this amount would be considered a Jumbo loan.
Is the Jumbo Approval Process More Difficult?
Now, you may be wondering if getting approved for a Jumbo loan more difficult than getting approved for a traditional loan. The answer is, it depends on many factors. Jumbo loans overall will typically have stricter requirements and higher credit score thresholds compared to conventional loans. This is because mortgage companies and banks take on more risk when lending such a large amount of money.
But there are other factors like the borrower’s debt ratios, down payment and final loan amount that determine “how difficult” the approval process is. Again, many of these same factors also apply to other loan programs like conforming, FHA and VA loans. But jumbo loan weigh heavily on down payment and final loan amount. Ex: A buyer financing a $1.5m loan amount will have greater flexibility in regard to credit score, lower down payment, etc. when compared to $2.5m. When you reduce more risky components, it allows for greater flexibility in the approval process.
One of the primary differences between a Jumbo loan and a conventional loan is the down payment requirement. While conventional loans have options with only a down payment of 0-5%, Jumbo loans typically require 5%-20% down. This means you will need to have more money saved up in order to qualify for a Jumbo loan.
Another important factor is the credit score. While conventional loans may accept credit scores as low as 600, Jumbo loans typically require a higher credit score of 660-740, depending on loan amount. This is because banks want to ensure that they are lending to financially responsible and reliable borrowers when dealing with such large loan amounts.
Debt ratios are a big factor and often determine how much a buyer will qualify for. This includes the debt-to-income (DTI) housing ratio and the overall expense ratio. The housing expense DTI specifically looks at how much of your income goes towards your mortgage payment with taxes, homeowners insurance and HOA if applicable. The overall DTI ratio looks at your housing expense PLUS any other revolving debts like monthly auto and credit card payments.
Generally, lenders prefer to see this housing DTI ratio to be under 35% and total debt ratios below 45%. However, some Jumbo loan lenders have more lenient requirements and allow for higher DTI ratios, depending on your overall financial profile.
Jumbo Loan Application Processing:
When it comes to paperwork during the application process, jumbo loans require basically the same items as other mortgages. This includes most recent (3) months of income pay stubs, two years of tax returns and W2’s if applicable, employment and living/rental history. The only real difference we find can come during the home appraisal process when dealing with larger loans exceeding $3m.
In select cases, larger super jumbo loans can require two appraisals. Due to the increased risk, lenders want to be more diligent when it comes to the appraisal. This is something more likely only for high loan amounts at max loan-to-value.
Buyers that want to learn more or have questions about getting pre-approved can connect with us 7 days a week by calling or just fill out the Quick Contact Form on this page.