For many individuals and families, owning a home is a lifelong dream. However, with rising real estate prices, some may find themselves seeking financing beyond the conforming loan limit. In this instance, you’d need to apply for a jumbo loan.
What is a jumbo loan?
What exactly is a jumbo loan in Colorado? A jumbo loan is a specialized type of mortgage that comes into play when you’re seeking financing for a home that surpasses the conforming loan limits (CLL) established by the Federal Housing Finance Agency (FHFA). Typically, this type of loan is necessary for upscale, luxurious properties or those situated in pricey housing markets.
If you’re considering purchasing a home that requires financing beyond the conforming loan limit, then you’ll need to go for a jumbo loan. Colorado 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 Colorado?
In 2023, the conforming loan limit for most U.S. real estate markets is $726,200. However, the loan limit in Colorado depends on what county you’re planning to buy a home in.
- $726,200 is the conforming loan limit in most Colorado counties
- $1,075,250 is the maximum limit in higher-cost counties
As a reminder, the loan amount is what determines whether or not you’ll need a jumbo loan, not the price of the home you’re buying. So, if you were to put $50,000 down on a $750,000 home in Jackson County, the loan would be $700,000, which is under the CLL for this area. In this case, your loan wouldn’t be considered a jumbo loan.
The following counties in Colorado have a conforming loan limit beyond $726,200 for 2023:
| County | FHFA Conforming Loan Limit |
| Adams County | $787,750 |
| Arapahoe County | $787,750 |
| Boulder County | $856,750 |
| Broomfield County | $787,750 |
| Clear Creek County | $787,750 |
| Denver County | $787,750 |
| Douglas County | $787,750 |
| Eagle County | $1,075,250 |
| El Paso County | $787,750 |
| Elbert County | $787,750 |
| Garfield County | $948,750 |
| Gilpin County | $787,750 |
| Jefferson County | $787,750 |
| Park County | $787,750 |
| Pitkin County | $948,750 |
| Routt County | $845,250 |
| San Miguel County | $862,500 |
| Summit County | $953,350 |
This FHFA map will give you more specific information related to the conforming loan limits in your county.
What are the requirements for a jumbo loan in Colorado?
Borrowers must meet stricter requirements to qualify for a jumbo loan than they would for 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 applying for a jumbo loan in Colorado, credit score requirements are typically more stringent 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 loan.
Larger down payment: Purchasing a high-priced home usually requires a larger down payment from the buyer. Conventional mortgages may offer programs for down payments as low as 3%- 5%, but non-conforming loans require a minimum down payment of 10%, with some lenders requiring up to 30%. If the borrower puts down less than 20%, they will likely need to pay for private mortgage insurance (PMI).
More assets: Colorado jumbo loan lenders generally require borrowers to demonstrate a strong financial profile, including substantial liquid assets or savings. To qualify for a jumbo loan, borrowers must have enough reserves to cover at least one year of mortgage payments. This requirement ensures that borrowers have the financial flexibility to meet their loan obligations in the event of a financial hardship.
Lower debt-to-income ratio (DTI): When applying for either a conforming loan or non-conforming loan, 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 mortgage should aim for a DTI under 43% and ideally closer to 36%.
Additional home appraisals: For a jumbo loan, mortgage lenders may require a second appraisal to ensure that the property’s value is accurate. This is particularly true in counties where there are few comparable property sales. The appraisal acts as a second opinion and helps the mortgage 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.
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