Depending on the loan amount you need and where you’re buying a home in Virginia, 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?
A jumbo loan in Virginia is a type of mortgage that enables homebuyers to borrow more than the limits set by the Federal Housing Finance Agency (FHFA) for conforming loans. The conforming loan limit is the maximum amount of money that a lender will provide to borrowers at a specific interest rate and is established each year. Jumbo loans are necessary for homebuyers who want to purchase a high-value property, such as a luxury home, that exceeds the conforming loan limit.
If you find yourself in a situation where the home you wish to purchase requires borrowing beyond the CLL, then you’ll need to pursue a jumbo loan. But because of the larger loan amounts and increased risk for lenders, Virginia jumbo loans often come with higher interest rates and stricter requirements than conventional loans. For instance, a larger down payment and a higher credit score may be required to qualify for a jumbo loan.
What is the jumbo loan limit in Virginia?
In 2023, the conforming loan limit for a single-family home in most markets is $726,200. However, these limits can vary depending on where you’re buying a home in Virginia.
- $726,200 is the conforming loan limit in most Virginia counties
- $1,089,300 is the maximum limit in higher-cost counties
Keep in mind that the amount being borrowed is what determines whether or not you’ll need a jumbo loan, not the home price. So, if you were to put $50,000 down on a $750,000 home in Chesterfield 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.
The following counties in Virginia have a conforming loan limit beyond $726,200 for 2023:
| County | FHFA Conforming Loan Limit |
| Alexandria City County | $1,089,300 |
| Arlington County | $1,089,300 |
| Clarke County | $1,089,300 |
| Culpeper County | $1,089,300 |
| Fairfax County | $1,089,300 |
| Fairfax City | $1,089,300 |
| Falls Church City | $1,089,300 |
| Fauquier County | $1,089,300 |
| Fredericksburg City | $1,089,300 |
| Loudoun County | $1,089,300 |
| Madison County | $1,089,300 |
| Manassas City | $1,089,300 |
| Manassas Park City | $1,089,300 |
| Prince William County | $1,089,300 |
| Rappahannock County | $1,089,300 |
| Spotsylvania County | $1,089,300 |
| Stafford County | $1,089,300 |
| Warren County | $1,089,300 |
You can find more information on the conforming loan limits specific to where you’re looking to buy a home in Virginia by using this FHFA map.
What are the requirements for a jumbo loan in Virginia?
As previously mentioned, the requirements for a jumbo loan are much more stringent than the requirements for a conforming loan. The specific requirements may vary from lender to lender, but below are the typical requirements for borrowers seeking a jumbo loan in Virginia.
Higher credit score: In order to be eligible for a jumbo loan, 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: When applying for a jumbo loan, keep in mind that down payment requirements are generally more substantial than for traditional mortgages. While the specific amount will depend on the lender and the borrower’s financial situation, many jumbo loan lenders require a down payment of at least 10%, and some require as much as 20% or more.
More assets: Jumbo loan borrowers are typically required to have more assets than those seeking conventional loans. Lenders will review a borrower’s assets to ensure they have enough liquid assets or savings to cover at least one year of loan payments. This requirement is in place to mitigate the increased risk associated with larger loan amounts.
Lower debt-to-income ratio (DTI): Mortgage lenders typically require a debt-to-income ratio (DTI) of under 43% for jumbo loan borrowers, although a DTI closer to 36% is preferred. This ratio is calculated by dividing the sum of all monthly debt payments by the borrower’s gross monthly income. A lower DTI indicates a stronger ability to repay the loan and can help borrowers secure more favorable terms and rates. It’s important for Virginia borrowers seeking a jumbo mortgage to have a clear understanding of their DTI and take steps to improve it if necessary.
Additional home appraisals: Your mortgage lender may require a second home appraisal as an extra layer of protection when it comes to jumbo loans. The second appraisal serves as a second opinion to ensure the property’s value aligns with the loan amount. In housing markets with limited comparable property sales, this extra appraisal may cost more than in neighborhoods with more frequent sales.
This post first appeared on Redfin.com. To see the original, click here.