Are you planning to buy a luxurious house in Oregon or property in an expensive market this year? If so, you might be wondering what a jumbo loan is and whether it’s right for you.
What is a jumbo loan?
So what are jumbo loans in Oregon? Simply put, they are loans that exceed the limits set by the FHFA for conforming loans. Jumbo loans allow borrowers to finance homes that exceed the conforming loan limit, 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 conforming loan limits (CLL), then you’ll need to apply for a jumbo loan. However, because of the larger loan amounts and the risk involved, jumbo loans often come with stricter requirements and higher interest rates than conventional loans. Lenders typically require a larger down payment, higher credit score, and more assets on hand to qualify for a jumbo loan in Oregon.
What is the jumbo loan limit in Oregon?
In Oregon, the conforming loan limit is $726,200 across all counties. For example, if you’re buying a home in Multnomah County, where the median sale price is $495,000, a loan limit exceeding $726,200 would be considered a jumbo mortgage.
Keep in mind that the loan amount is what determines whether or not you’ll need a jumbo loan, not the home price. So, if you were to put $100,000 down on a $780,000 home in Portland, the loan would be $680,000, which is under the conforming loan limit for this area. In this case, your loan wouldn’t be considered a jumbo loan.
Additional information regarding the conforming loan limits in Oregon can be found here.
What are the requirements for a jumbo loan in Oregon?
As previously mentioned, the requirements for a jumbo loan are much more stringent than the requirements 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 have your loan application approved for a jumbo mortgage, most lenders will require a credit score of 720 or higher. While some lenders may be more lenient and accept a score as low as 660, a score below this is generally not accepted. In contrast, a credit score as low as 620 could suffice for a conforming loan with some lenders.
Larger down payment: Obtaining a jumbo mortgage typically requires a larger down payment compared to a conventional 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): Mortgage 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 Oregon, 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: When you buy a home in Oregon, lenders 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 counties with very few comparable property sales, the cost of the appraisal may be higher than in neighborhoods with more frequent sales.
This post first appeared on Redfin.com. To see the original, click here.