Making a home purchase is a fun and exhilarating process, but it can also be quite stressful. Aside from finding the perfect property that checks all your boxes, you must also heavily consider how you’ll pay for the home.
Working your way through the mortgage process can feel like a full-time job since dozens of loan programs are available. However, by doing a little research, you can get a better idea of the financing you need and the qualifications you must meet to receive the funds.
One type of home loan borrowers can consider is the jumbo loan. Read on to learn more about jumbo loans and see the Florida jumbo loan limit in 2023.
What Is a Jumbo Loan?
Jumbo loans, or jumbo mortgages, are home loans with higher limits than conforming loans. Conforming loans have a lending maximum that the Federal Housing Finance Agency (FHFA) sets yearly.
When someone wants to buy a property and the amount they can borrow from a conforming loan isn’t enough to finance the entire purchase price of the home, they need a jumbo loan.
Jumbo loans came about as a way to finance luxury properties and properties in highly competitive local markets.
Since the government-sponsored enterprise (GSEs) Freddie Mac and Fannie Mae cannot purchase, guarantee, or secure jumbo loans, they are riskier for lenders and thus come with stricter requirements. Nevertheless, homebuyers can use a jumbo loan to finance the following:
- Investment properties
- Primary residences
- Second homes
- Vacation homes
If you expect you’ll need a jumbo loan, tell your realtor during the home-buying process. They can help you find a lender.
Jumbo Loans vs. Conventional Loans
So what’s the difference between a jumbo loan and a conventional loan?
First, jumbo loans require a larger down payment. While you can buy a home with 0% to 5% down with a conventional loan, this isn’t possible with a jumbo loan. This is why conventional loans tend to be more popular with first-time homebuyers.
Further, jumbo loans often have slightly higher interest rates. Although you can find jumbo loan rates that are the same or lower than conventional loans, usually, they are higher because jumbo loans are riskier.
On the other hand, there are many similarities between these loans. With either home loan, the borrower will need to make monthly payments. Most loan terms are 30 years. Also, both loan types typically have a fixed rate, though adjustable rates are available, too. Speak with your mortgage broker to explore the options.
Further, you’ll likely need mortgage insurance if you put down less than 20%. The lender will use the loan-to-value ratio using the property’s appraisal price (not the purchase price) to determine the insurance cost.
Finally, both loans have closing costs, usually between 3% and 5%.
Jumbo Loan Limits in Florida
The 2023 conforming loan limit is $726,200, up from $647,200 in 2022 for a single-family home. High-cost areas have a limit of $1,089,300. High-cost areas are those where 115% of the local media home value exceeds the conforming loan limit.
Additionally, the following places have special loan limits that are the same as high-cost areas:
- The U.S. Virgin Islands
The 2023 loan limit increase means that now more than two million homes will not require a jumbo loan, as a conforming loan will be sufficient.
However, although the national limit is $726,200, each county across the U.S. has its own limit up to this amount based on median home prices. For example, the 2023 limit for Miami-Dade County and Palm Beach is $557,750, even though these are highly competitive real estate markets.
The only county in Florida with a limit above FHFA’s maximum is Monroe County, with a 2023 limit of $874,000.
You can view the FHA Mortgage Limits page to see the specific limits for each county in Florida or explore other states, too.
When it comes to jumbo loans, there is no jumbo loan limit in Florida for 2023. Jumbo loans don’t have upper limits, meaning the loan amount can essentially be limitless.
Florida Jumbo Loan Requirements
Because of their size, the qualifications for jumbo loans are stricter than other loan options. Check out the requirements below.
Jumbo mortgage loans have stricter underwriting guidelines. Most jumbo loans require a credit score of 700 or higher. Your debt-to-income ratio (DTI ratio) must also be at least 43% or below, but closer to 36% or below is better.
The higher your credit score and the lower your DTI ratio, the better mortgage rate you’ll get for your jumbo loan.
You will also need to make a minimum down payment of 10% to 15%, although some lenders may request a down payment of up to 30%.
In addition to the loan application, you’ll need to provide the lender with the following paperwork:
- Bank statements
- Completed tax returns
- Housing records
- Investment disclosures
If you’re self-employed, the lender will require additional documentation.
Some lenders ask for a property appraisal to get a loan. Before contacting an appraiser, familiarize yourself with the appraisal process and how it affects your loan application.
How to Apply for a Jumbo Loan
Let’s review how to apply for one of these loans.
First, remember that when looking for a jumbo loan provider, the lender must have a Nationwide Mortgage Licensing System (NMLS) license. This ensures you don’t get a bad loan.
Once you find a lender, follow these steps:
- Collect all necessary paperwork
- Get a preapproval letter from the lender
- Fill out a jumbo loan application
- Obtain an appraisal, if required
- Get approved
Ready to Get Started on Your Jumbo Loan Application?
Are you feeling more prepared to enter the mortgage process? Whether you want to purchase a home or refinance your current mortgage via rate/term or cash-out, apply now for a jumbo loan from the Associates Home Loan of Florida. We strive to help all Floridians get approved for the home loan they need!