When it comes to buying a home, buyers can find it difficult to obtain financing beyond conforming loan limits. In this instance, you may need to apply for a jumbo loan.
What is Jumbo Loan?
A jumbo loan There is a type of mortgage in Kentucky that is used to finance homes that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA). Often, this type of loan is necessary for high-end, luxury homes or homes located in expensive housing markets.
If you need to borrow more than the Conforming Loan Limit (CLL) for the house you are buying, you will need to apply for a jumbo loan. Keep in mind, however, that jumbo loans come with higher interest rates and stricter requirements than conventional loans because of the larger loan amount and the risk associated with them. For example, qualifying for a jumbo loan in Kentucky may require a large down payment and a high credit score.
What is the jumbo loan limit in Kentucky?
In Kentucky, the corresponding loan limit is $726,200 in all counties. For example, the conforming loan limit Jefferson County $726,200, so if the required loan amount is even one dollar more than this amount, it is considered a jumbo loan.
As a reminder, the loan amount is what determines whether or not you’ll need a jumbo loan, not the price of the home you’re buying. So, if you need to reduce $50,000 on $750,000 home in louisville, the mortgage will be $700,000, which is under the typical loan limit for the area. In this case, your loan will not be considered as a jumbo loan.
Check this out to identify the conforming loan limits where you are considering buying a home in Kentucky FHFA Map,
What Are The Requirements For Jumbo Loans In Kentucky?
As mentioned earlier, the requirements for a jumbo loan are much more stringent than those for a conforming loan. Each lender may have different requirements or processes, but below are the specific requirements for borrowers seeking jumbo loans.
High Credit Score: When it comes to jumbo loans, lenders typically look for a credit score of 720 or higher to qualify a borrower. While some lenders may accept a score as low as 660, this is usually the lowest score to qualify.
Large Advance Payment: This is often needed to buy a high-priced home. large advance payment from buyer. Conforming loans may offer programs for down payments as low as 3% – 5%, but jumbo loans require a minimum 10% down payment, with some lenders requiring up to 30%. If the home buyer puts down less than 20%, he or she will need to pay for private mortgage insurance (PMI).
More Assets: Jumbo loan borrowers usually require additional assets. In particular, lenders may require borrowers to demonstrate sufficient liquid assets or savings to cover one year’s loan payments.
Low debt-to-income ratio (DTI): When applying for a jumbo loan, Kentucky lenders typically look for borrowers who debt-to-income ratio (DTI) down from 43%. Ideally, a DTI close to 36% or less is preferred. DTI is calculated by dividing the sum of all monthly loan payments by gross monthly income. A low DTI reflects a borrower’s ability to manage their current debt load while taking on additional mortgage payments. It also indicates greater financial stability and ability to make timely payments for their jumbo loans.
Additional Home Appraisals: Your Lender May Need a Second home appraisal For jumbo loans, to get a second opinion on the value of the property, apart from the standard appraisal. This is especially true in locations with limited comparable property sales. The second appraisal helps lenders ensure that they are providing funding for a property that is worth the loan amount or more.
