Depending on the loan amount you need and where you’re buying a home in New Jersey, 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 exactly is a jumbo loan in New Jersey? It’s a mortgage loan that allows homebuyers to finance a property that exceeds the conforming loan limit set by the FHFA. In simpler terms, a jumbo loan is a specialized mortgage that enables you to borrow more money than you would be able to with a conventional loan. These loans are typically used to finance high-end or luxury properties in areas with high home prices.
If the loan amount needed is more than the conforming loan limit (CLL), you’ll need a jumbo loan. New Jersey 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 New Jersey?
In 2023, the conforming loan limit for a single-family home in most U.S. markets is $726,200. However, this limit can be higher in areas where the median home price is significantly above the national average.
- $726,200 is the conforming loan limit in most New Jersey counties
- $1,089,300 is the maximum limit in higher-cost counties
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 you’re buying. So, if you were to put $50,000 down on a $750,000 home in Salem 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 New Jersey have a conforming loan limit beyond $726,200 for 2023:
| County | FHFA Conforming Loan Limit |
| Bergen County | $1,089,300 |
| Essex County | $1,089,300 |
| Hudson County | $1,089,300 |
| Hunterdon County | $1,089,300 |
| Middlesex County | $1,089,300 |
| Monmouth County | $1,089,300 |
| Morris County | $1,089,300 |
| Ocean County | $1,089,300 |
| Passaic County | $1,089,300 |
| Somerset County | $1,089,300 |
| Sussex County | $1,089,300 |
| Union County | $1,089,300 |
You can find the conforming loan limits for your county by using this FHFA map.
What are the requirements for a jumbo loan in New Jersey?
To qualify for a jumbo loan in New Jersey, borrowers must meet stricter requirements 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.
Higher credit score: In order to be eligible for a jumbo mortgage, 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: Jumbo loans typically require larger down payments than traditional mortgages. Generally, mortgage lenders require a down payment of at least 20% of the home’s purchase price to qualify for a jumbo loan. However, some lenders may require a higher percentage, depending on the borrower’s creditworthiness and overall financial situation. It’s worth noting that larger down payments can help to reduce monthly mortgage payments, as well as overall interest costs over the life of the loan.
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): To qualify for a jumbo loan in New Jersey, 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: When you buy a home in New Jersey, a mortgage lender will require a home appraisal to confirm that the property’s value is equal to or higher than the loan amount. In some cases, a lender may require an additional appraisal for a jumbo loan. In cities with very few comparable property sales, the cost of the appraisal may be higher than in places with more frequent sales.
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