For many individuals and families, owning a home is a lifelong dream. However, with rising real estate prices, some may find themselves seeking financing beyond the conforming loan limit. This is where jumbo loans come into play.
What is a jumbo loan?
A jumbo loan in Georgia 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 (CLL) 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’re planning to buy requires borrowing beyond the conforming loan limit, then you’ll need to pursue a jumbo loan. However, it’s important to note that jumbo loans come with higher interest rates and stricter requirements than conventional loans due to the larger loan amounts and risk associated with them. For instance, a larger down payment and a higher credit score may be required to qualify for a jumbo loan in Georgia.
What is the jumbo loan limit in Georgia?
In Georgia, the conforming loan limit is $726,200 across all counties. For example, in Fulton County the jumbo loan limit is $726,200, so if the loan amount needed is even one dollar more than this amount, it’ll be considered a jumbo loan.
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. So, if you were to put $50,000 down on a $750,000 home in Atlanta, 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.
Additional information regarding the conforming loan limits in Georgia can be found here.
What are the requirements for a jumbo loan in Georgia?
Borrowers must meet stricter requirements to qualify for a jumbo loan than they would for a conforming loan. Each lender may have different requirements or processes, 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 require homebuyers 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 buying a higher-priced home, buyers will typically need to make a more substantial down payment. While borrowers seeking conforming loans may be able to find programs that allow for down payments as low as 3%, those seeking a jumbo loan should expect to put down a minimum of 10%, and in some cases, as much as 30%. If a lender allows for a down payment of less than 20%, the borrower will need to pay for private mortgage insurance (PMI).
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): Whether you’re applying for a traditional mortgage or a jumbo loan in Georgia, lenders evaluate your spending habits and creditworthiness by analyzing your debt-to-income ratio (DTI). The DTI is determined by dividing the total of your monthly debt payments by your gross monthly income. While some lenders may accept a DTI as high as 50% for a conforming loan, those applying for a jumbo loan should aim for a DTI under 43% and ideally closer to 36%.
Additional home appraisals: Lenders may require a second home appraisal for a jumbo loan, in addition to the standard appraisal, to get a second opinion on the property’s value. This is especially true in cities with limited comparable property sales. The second appraisal helps lenders ensure that they are providing funds for a property that is worth the loan amount or more.