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In 2020, the conforming loan limit is $510,400 in most areas and $765,600 in high-cost areas. Jumbo loans are a good match for applicants that need a bigger loan than the local conventional limits but are unable to make a larger down payment. This is the case for many people looking at expensive properties in expensive neighborhoods.
Stellar credit and large cash reserves are good starting points for applicants looking for a jumbo loan. Lenders typically look for a credit score of at least 700, and the ability for the applicant to make a down payment of 20% of the purchase price. Furthermore, a total debt-to-income ratio should not exceed 43% of the applicant’s gross income.
Rates for conventional mortgages have been at historic lows for practically the entire year, and we expect them to stay at these levels in the upcoming months. There is minimal demand for jumbo loans in the secondary markets; therefore, interest rates tend to be higher than conventional mortgages.
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