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?
In South Carolina, a jumbo loan is a type of mortgage used to finance a property that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). Jumbo loans are typically necessary for expensive homes or properties in high-priced housing markets like Charleston. These loans are specialized and designed to accommodate larger amounts of borrowing for upscale and luxurious properties.
If you need to borrow more than the conforming loan limit, you’ll need a jumbo loan. South Carolina 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 South Carolina?
In South Carolina, the conforming loan limit is $726,200 across all counties. For example, if you’re buying a home in Charleston County, where the median sale price is $567,000, 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 $50,000 down on a $750,000 home in Charleston County, the mortgage would be $700,000, 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 South Carolina?
The requirements to qualify for a jumbo loan in South Carolina are more stringent than the requirements for 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: In order to be approved for a jumbo mortgage, most lenders will require a credit score of 720 or higher. While some lenders may be more lenient and accept a score as low as 660, a score below this is generally not accepted. In contrast, a credit score as low as 620 could suffice for a conforming loan with some lenders.
Larger down payment: When applying for a jumbo mortgage, keep in mind that down payment requirements are generally more substantial than for conventional mortgages. 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): Whether you’re applying for a traditional mortgage or a jumbo loan, lenders evaluate your spending habits and creditworthiness by analyzing your debt-to-income ratio (DTI). The DTI is determined by dividing the total of your monthly debt payments by your gross monthly income. While some lenders may accept a DTI as high as 50% for a conforming loan, those applying for a non-conforming loan should aim for a DTI under 43% and ideally closer to 36%.
Additional home appraisals: A home appraisal is required whenever a homebuyer receives financing for their home purchase. However, for jumbo loans, your lender may require an additional appraisal. In areas with limited comparable property sales, this appraisal can be more expensive than in areas with higher sales rates.
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