Designed with the funding of luxury property purchases in mind, Jumbo Loans allow for borrowers to circumvent the maximum limits put in place by the Federal Housing Finance Agency (FHFA). Because of this, these loans aren’t guaranteed by organizations like Fannie Mae or Freddie Mac, requiring a highly stringent standard for qualification. Jumbo Loan hopefuls must hold an impeccable credit score (700 at the very least) and a low debt-to-income (DTI) ratio (typically less than 43%).
But they must also have enough liquid assets to cover anywhere between 10% to 15% of the downpayment on their luxury property as well as cover the lofty monthly mortgage payments. Fortunately, recent years have found interest rates for Jumbo Loans balancing out to Conventional Loan levels.