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    Jumbo loans are more accessible than ever. According to the Mortgage Bankers Association, jumbo loan availability hit a record high in November, meaning it’s now easier for homebuyers to qualify for these larger-sized loans.

    Does that mean you should consider one for your home purchase? If so, what does it mean for your wallet? Let’s dive into jumbo loans and when to use them.

    What Is a Jumbo Loan?

    Jumbo loans are mortgages that go beyond the conforming loan limit.

    As dictated by the Federal Housing Finance Agency, in most of the United States, the 2023 CLL value for one-unit properties has been increased to $726,200 – an increase of 12% over 2022’s limit of $647,200.​

    Do Jumbo Loan Limits Vary by State?

    In some higher-cost housing markets, the threshold may be higher.

    However, it is important to note that these limits don’t always vary by state. Rather, they vary by county within those states. 

    The exception is Hawaii and Alaska, where jumbo limits are consistent no matter which county you purchase in.

    In 2023, a net of three new counties were moved to the high-cost baseline loan limits with the following states including at least one high-cost area:

    • California
    • Colorado
    • District of Columbia
    • Florida
    • Idaho
    • Maryland
    • Massachusetts
    • New Hampshire
    • New Jersey
    • New York
    • Pennsylvania
    • Tennessee
    • Utah
    • Virginia
    • Washington
    • West Virginia
    • Wyoming

    These nuances are important if you are looking at a home in one of these states, as your loan limits may vary just a few miles away.

    To see the conforming loan limits for your county, check out Fannie Mae’s Area Median Income Lookup Tool.

    What Is a VA Jumbo Loan?

    There are also VA jumbo loans, which are available to veterans and military members only. Similar to a ‘standard’ jumbo loan, a VA loan is considered a VA jumbo loan when the loan amount exceeds the county-specific VA loan limit.

    The VA loan limit for most counties in 2023 is $726,200 but reaches $1,089,300 in high-cost areas.

    A huge benefit for VA jumbo loans is you do not need a down payment if you are a veteran with full VA loan entitlement. And, as of 2020, eligible Veterans, service members, and survivors with full entitlement no longer have limits on loans over $144,000.

    In addition to no down payment, the U.S. Department of Veterans Affairs guarantees to your lender that if you default on a loan that’s over $144,000, they will pay them up to 25% of the loan amount. 

    However, there are specific requirements that must be met to qualify, including at least one of these criteria must be true:

    • You’ve never used your home loan benefit, or
    • You’ve paid a previous VA loan in full and sold the property (in this case, you’d have your full entitlement restored), or
    • You’ve used your home loan benefit, but had a foreclosure or compromise claim (also called a short sale) and repaid us in full

    If you have questions about your qualifications or loan options, it is best to reach out to a qualified VA mortgage lender.

    When Should You Use a Jumbo Loan?

    You can use jumbo loans to buy a primary residence, second home, vacation property, or investment property, but keep in mind: qualifying for these loans is harder than other mortgage options.

    Because these loans go beyond the conforming limit, they can’t be purchased by Fannie Mae or Freddie Mac, and lenders can incur a loss if a borrower defaults on their loan. For these reasons, mortgage companies hold applicants to much stricter standards than on other loan types. 

    You’ll likely need:

    • At least a 700 credit score (maybe 720)
    • A large down payment (20 to 30% in most cases)
    • A low debt-to-income ratio
    • Cash reserves

    In general, a jumbo loan is a good choice if you’re buying a home in a high-cost market (or you’re just buying a more expensive home) and you have good credit and are on solid financial footing.

    Keep in mind that a jumbo loan will mean a jumbo-sized monthly payment, too, so make sure you stay within your means. You generally want your housing costs to clock in at 30% or less than your monthly income.

    Any more than that, and you could have problems staying afloat  — especially if an emergency crops up or you have a sudden change in income.

    The Bottom Line

    Jumbo loans are a nice option to have, but they’re not right for every homebuyer. Do you need help determining what type of mortgage loan is best for your home buying goals?

    Then reach out to Embrace Home Loans today. We’re here to help.

    Your mortgage options for a smooth journey home.

    Get expert guidance and personalized solutions for a stress-free mortgage experience.