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. This is where jumbo loans come into play. So whether you’re looking to buy a home in Omaha or a home in Lincoln, let’s break down what a jumbo loan is in Nebraska, the 2023 conforming loan limit, and what’s needed to qualify for this type of loan.
What is a jumbo loan?
A jumbo loan in Nebraska is a type of mortgage that enables homebuyers to borrow more than the limits set by the Federal Housing Finance Agency (FHFA) for conforming loans. The conforming loan limit (CLL) is the maximum amount of money that a lender will provide to borrowers at a specific interest rate and is established each year. Jumbo loans are necessary for homebuyers who want to purchase a high-value property, such as a luxury home, that exceeds the conforming loan limit.
If you need to borrow more than the conforming loan limit, you’ll need a jumbo loan. Nebraska jumbo loans allow you to borrow more money to buy a more expensive home, but they also come with higher interest rates and stricter requirements than conventional loans.
What is the jumbo loan limit in Nebraska?
In Nebraska, the conforming loan limit is $726,200 across all counties. For example, if you’re buying a home in Douglas County, where the median sale price is $309,000, a loan limit exceeding $726,200 would be considered a jumbo mortgage.
As a reminder, the loan amount is what determines whether or not you’ll need a jumbo loan, not the home price. So, if you were to put $100,000 down on a $780,000 home in Omaha, 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.
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 Nebraska?
As previously mentioned, the requirements for a jumbo loan are much more stringent than a conforming loan. The specific requirements can vary from lender to lender, but below are the typical requirements for borrowers seeking a jumbo loan.
Higher credit score: When it comes to applying for 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 essential to have a strong credit profile and a solid financial history to increase your chances of being approved for a jumbo mortgage.
Larger down payment: When applying for a jumbo loan, keep in mind that down payment requirements are generally more substantial than for conventional loans. While the specific amount will depend on the lender and the borrower’s financial situation, many jumbo loan lenders require a down payment of at least 10%, and some require as much as 20% or more.
More assets: To qualify for a jumbo loan, lenders require borrowers to demonstrate that they have sufficient liquid assets or savings to cover at least one year of loan payments. The exact amount of assets needed can vary depending on the lender and the size of the loan, but having more assets can increase the chances of approval and potentially lead to better terms and interest rates.
Lower debt-to-income ratio (DTI): Lenders typically require a debt-to-income ratio (DTI) of under 43% for jumbo loan borrowers, although a DTI closer to 36% is preferred. This ratio is calculated by dividing the sum of all monthly debt payments by the borrower’s gross monthly income. A lower DTI indicates a stronger ability to repay the loan and can help borrowers secure more favorable terms and rates. It’s important for Nebraska borrowers seeking a jumbo mortgage to have a clear understanding of their DTI and take steps to improve it if necessary.
Additional home appraisals: Mortgage lenders may require a second home appraisal as an extra layer of protection when it comes to jumbo loans. The second appraisal serves as an additional opinion to ensure the property’s value aligns with the loan amount. In housing markets with limited comparable property sales, this second appraisal may cost more than in neighborhoods with more frequent sales.
This post first appeared on Redfin.com. To see the original, click here.