Depending on the loan amount you need and where you’re buying a home in New York, you may find it difficult to find financing beyond the conforming loan limits. If this is the case, you may need a jumbo loan.
What is a jumbo loan?
A jumbo loan is a type of mortgage that’s designed to help you finance the purchase of a home that exceeds the limits set by the Federal Housing Finance Agency. In New York, this type of loan is often needed for high-end homes or properties located in expensive housing markets like Manhattan. With a jumbo loan, you can get the financing you need to buy your dream home, even if it’s more expensive than what a standard mortgage can cover.
If you need to borrow more than the conforming loan limit, you’ll need a jumbo loan. However, keep in mind 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 New York.
What is the jumbo loan limit in New York?
In 2023, the conforming loan limit for a single-family home in most U.S. markets is $726,200. However, this limit can be higher in areas where the median home price is significantly above the national average.
$726,200 is the conforming loan limit in most New York counties
$1,089,300 is the maximum limit in higher-cost counties
Keep in mind that 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 were to put $100,000 down on a $780,000 home in Albany County, the loan would be $680,000, which is under the conforming loan limit for this area. In this case, your loan wouldn’t be considered a jumbo loan.
The following counties in New York have a conforming loan limit beyond $726,200 for 2023:
FHFA Conforming Loan Limit
New York County
You can find the conforming loan limits for your county by using this FHFA map.
What are the requirements for a jumbo loan in New York?
As previously mentioned, the requirements for a jumbo loan in NY are much more stringent than a conforming loan. The specific requirements may vary from lender to lender, but below are the typical requirements for borrowers seeking a jumbo loan.
Higher credit score: When it comes to jumbo loans in New York, lenders generally look for a credit score of 720 or above to qualify a borrower. While some lenders may accept a score as low as 660, this is typically the lowest score for qualification.
Larger down payment: Jumbo loans typically require larger down payments than traditional mortgages. While the exact amount varies depending on the lender and the borrower’s financial profile, 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 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 of mortgage payments. This requirement ensures that borrowers have the financial flexibility to meet their loan obligations in the event of a financial hardship.
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 applicants 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: For a jumbo loan in NY, mortgage lenders may require a second home appraisal to ensure that the property’s value is accurate. This is particularly true in regions where there are few comparable property sales. The second appraisal acts as a second opinion and helps the lender to mitigate their risk. It’s important to note that the cost of a second appraisal may be higher than a typical home appraisal, particularly in areas with fewer sales.
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