For many individuals and families, owning a home is a lifelong dream. However, with rising real estate prices, some may find themselves seeking financing beyond the conforming loan limit. In this instance, you’d need to apply for a jumbo loan.
What is a jumbo loan?
A jumbo loan in Pennsylvania is a type of mortgage that is used to finance homes that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA). Oftentimes, this type of loan is necessary for high-end, luxury homes or homes located in expensive housing markets.
If you’re considering purchasing a home that requires financing beyond the conforming loan limit (CLL), then you’ll need to apply for a jumbo loan. However, it’s important to note that jumbo loans come with higher interest rates and stricter requirements than conventional loans due to the larger loan amounts and risk associated with them. For instance, a larger down payment and a higher credit score may be required to qualify for a jumbo loan in Pennsylvania.
What is the jumbo loan limit in Pennsylvania?
In 2023, the conforming loan limit for a single-family home in most markets is $726,200. However, in Pennsylvania counties where home prices are higher, the jumbo loan limit can actually be much higher.
- $726,200 is the conforming loan limit in most Pennsylvania counties
- $1,089,300 is the maximum limit in Pennsylvania’s more expensive counties
As a reminder, the amount being borrowed is what determines whether or not you’ll need a jumbo loan, not the price of the home you’re buying. So, if you were to put $100,000 down on a $780,000 home in Monroe 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.
The following counties in Pennsylvania have a conforming loan limit beyond $726,200 for 2023:
||FHFA Conforming Loan Limit
This FHFA map will give you more specific information related to the conforming loan limits in your county.
What are the requirements for a jumbo loan in Pennsylvania?
To qualify for a jumbo loan in Pennsylvania, 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: When it comes to securing a jumbo loan, credit score requirements are typically more stringent than for conventional mortgages. While some lenders may accept a lower score, a credit score of at least 720 is generally required to qualify for a jumbo loan. It’s important to have a strong credit profile and a solid financial history to increase your chances of being approved for a jumbo loan.
Larger down payment: Jumbo loans typically require larger down payments than conforming loans. While the exact amount varies depending on the lender and the borrower’s finances, 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 more assets than those seeking conventional loans. Lenders will review a borrower’s assets to ensure they have enough liquid assets or savings to cover at least one year of loan payments. This requirement is in place to mitigate the increased risk associated with larger loan amounts.
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 borrowers 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: Your mortgage lender may require a second home appraisal for a jumbo loan, in addition to the standard appraisal, to get a second opinion on the property’s value. This is especially true in regions with limited comparable property sales. The second appraisal helps lenders ensure that they are providing funds for a property that is worth the loan amount or more.