Depending on the loan amount you need and where you’re buying a home in Vermont, 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 Vermont? A jumbo loan is a mortgage loan that allows borrowers to finance a property that exceeds the conforming loan limit (CLL) 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 you’re considering purchasing a home that requires financing beyond the conforming loan limit, then you’ll need to go for a jumbo loan. It’s important for homebuyers to understand the requirements and implications of obtaining a jumbo loan in Vermont. For instance, borrowers typically need a higher credit score and a larger down payment to qualify for a jumbo loan.
What is the jumbo loan limit in Vermont?
In Vermont, the conforming loan limit is $726,200 across all counties. For example, if you’re buying a home in Windsor County, where the median sale price is $393,000, a loan limit exceeding $726,200 would be considered a jumbo loan.
Keep in mind that the amount being borrowed is what determines whether or not you’ll need a jumbo loan, not the price of the home. So, if you were to put $100,000 down on a $780,000 home in Windsor County, the mortgage would be $680,000, which is under the CLL for this area. In this case, your loan wouldn’t be considered a jumbo loan.
For more information on the conforming loan limit in your county, use the FHFA map.
What are the requirements for a jumbo loan in Vermont?
To qualify for a jumbo loan in Vermont, borrowers must meet stricter requirements 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: To qualify for a jumbo mortgage, borrowers typically need to have a credit score of at least 720. However, some lenders may be willing to accept scores as low as 660, although less frequently. A higher credit score demonstrates a borrower’s ability to manage credit responsibly and is an important factor that lenders evaluate when reviewing jumbo loan applications.
Larger down payment: Jumbo loans typically require larger down payments than conventional mortgages. While the exact amount varies depending on the lender and the borrower’s financial situation, down payment requirements for jumbo loans can be as high as 20% or more. That said, some lenders may offer jumbo loans with down payments as low as 10%, provided the borrower meets certain credit and income requirements.
More assets: Jumbo loan borrowers are typically required to have additional assets. In particular, lenders may require borrowers to demonstrate sufficient liquid assets or savings to cover one year’s worth of loan payments.
Lower debt-to-income ratio (DTI): Lenders look at a borrower’s DTI (debt-to-income ratio) to assess their creditworthiness and spending habits. For a conforming loan, a DTI as high as 50% may be acceptable to some lenders. However, jumbo loan applicants are required to have a lower DTI, ideally under 43% and closer to 36%. This is because jumbo loans are riskier for lenders due to the larger loan amounts. Borrowers with a higher DTI may still qualify for a jumbo loan, but it could result in a higher interest rate or a stricter approval process.
Additional home appraisals: A home appraisal is required whenever a homebuyer receives financing for their home purchase. However, for jumbo loans, your mortgage lender may require an additional appraisal. In areas with limited comparable property sales, this appraisal can be more expensive than in places with higher sales rates.