Depending on the loan amount you need and where you’re buying a home in Maine, 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?
So what are jumbo loans in Maine? They are large loans that exceed the loan limits set by the FHFA for conforming loans. Jumbo loans allow borrowers to finance homes that exceed the conforming loan limit (CLL), making it possible to buy high-end properties that may not be otherwise affordable.
If you’re considering purchasing a home that requires financing beyond the CLL, then you’ll need to apply for a jumbo loan. It’s important for homebuyers to understand the requirements and implications of obtaining a jumbo loan in Maine. For instance, borrowers typically need a higher credit score and a larger down payment to qualify for a jumbo loan.
What is the jumbo loan limit in Maine?
In Maine, the conforming loan limit is $726,200 across all counties. For example, the conforming loan limit in Cumberland County 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.
As a reminder, 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 Cumberland County, 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.
To identify the conforming loan limits where you’re considering buying a home in Maine, check out this FHFA map.
What are the requirements for a jumbo loan in Maine?
Borrowers must meet stricter requirements to qualify for a jumbo loan than they would for a conforming loan. The specific requirements can vary from lender to lender, but below are the typical requirements for borrowers seeking a jumbo loan in Maine.
Higher credit score: To qualify for a jumbo loan, borrowers typically need to have a credit score of at least 720. However, some lenders may be willing to accept scores as low as 660, although less frequently. A higher credit score demonstrates a borrower’s ability to manage credit responsibly and is a crucial factor that lenders evaluate when reviewing jumbo loan applications.
Larger down payment: Jumbo loans are a popular financing option for homebuyers looking to buy high-value homes. However, compared to conventional loans, jumbo loans typically require a larger down payment. While the exact amount varies depending on the lender and the borrower’s financial profile, down payment requirements for jumbo loans can be as high as 20% or more. It’s worth noting that putting down a larger sum upfront can often help borrowers secure a better interest rate on their jumbo loan.
More assets: To qualify for a jumbo loan, lenders require borrowers to demonstrate that they have sufficient liquid assets or savings to cover at least one year of loan payments. The exact amount of assets needed can vary depending on the lender and the size of the loan, but having more assets can increase the chances of approval and potentially lead to better terms and interest rates.
Lower debt-to-income ratio (DTI): To qualify for a jumbo loan in Maine, lenders typically look for a debt-to-income (DTI) ratio of no higher than 43%, and ideally closer to 36%. The DTI is calculated by dividing the sum of all monthly debt payments by the borrower’s gross monthly income. This requirement ensures that borrowers have a strong ability to repay their loan and manage their debt.
Additional home appraisals: For a jumbo loan, your mortgage lender may require a second appraisal to ensure that the property’s value is accurate. This is particularly true in regions 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 another appraisal may be higher than a typical home appraisal, particularly in areas with fewer sales.
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