For many individuals and families, owning a home is the dream of a lifetime. However, with rising real estate prices, some may find themselves looking for financing in excess of the conforming loan limit. This is when you may need to apply for jumbo loans.
What is Jumbo Loan?
What Exactly Is A Jumbo Loan In Iowa? A jumbo loan There is a special type of mortgage that comes in handy when you are looking for financing for a home that exceeds the Conforming Loan Limit (CLL) established by the Federal Housing Finance Agency (FHFA). Typically, this type of loan is required for high-rise, luxurious properties or properties located in expensive housing markets.
If the loan amount required is more than CLL, then you will need a jumbo loan. Iowa Jumbo loans allow you to borrow more money to buy a more expensive home, but they come with higher interest rates and stricter requirements than conventional loans.
What is the jumbo loan limit in Iowa?
In Iowa, the corresponding loan limit is $726,200 in all counties. For example, if you are buying House in Des Moines CountyWhere the average sale price is $132,000, loan limits in excess of $726,200 will be considered jumbo loans.
As a reminder, the amount to be borrowed determines whether or not you’ll need a jumbo loan, not the price of the home. So, if you need to reduce $50,000 on $750,000 home in burlington, 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.
For more information about the conforming loan limit in your county, access FHFA Map,
What Are The Requirements For Jumbo Loans In Iowa?
To qualify for a jumbo loan, borrowers must meet more stringent requirements than for a conforming loan. The specific requirements may differ from lender to lender, 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 scores as low as 660, this is usually the lowest threshold for qualifying.
Large Advance Payment: Jumbo mortgages usually require a larger mortgage advanced payment Compared to traditional mortgage. Typically, lenders require a down payment of at least 20% of the home’s purchase price to qualify for a jumbo loan. However, some lenders may require a higher percentage depending on the creditworthiness and overall financial condition of the borrower. Keep in mind that a larger down payment can help lower the monthly mortgage payment, as well as lower overall interest costs over the term of the loan.
More Assets: Jumbo loan lenders generally require borrowers to demonstrate a strong financial profile, including substantial liquid assets or savings. To qualify for a jumbo loan, borrowers must have enough reserves to cover at least one year’s mortgage payments. This requirement ensures that borrowers have the financial flexibility to meet their loan obligations in the event of financial hardship.
Low debt-to-income ratio (DTI): When applying for a jumbo mortgage, Iowa lenders typically look for a borrower 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 non-conforming loans.
Additional Home Appraisals: When you buy a home in Iowa, mortgage lenders will require home appraisal To confirm that the value of the property is equal to or more than the loan amount. In some cases, a lender may require an additional appraisal for a jumbo loan. In areas with very few comparable property sales, appraisal costs can be higher than in locations with more frequent sales.
