 TITLE: What Is a Jumbo Loan? CONTENT: Credit Score and Requirements Needed for a Jumbo Loan\n-----------------------------------------------------\nThe applicant-vetting process on jumbo loans may vary by lender (and applicant), but requirements over and above those for conventional mortgages may include:\n*   **Higher credit scores.** Many lenders require a FICO® Score☉ of 720 or better for many jumbo loans, and typically will accept no score lower than 660, whereas lenders may accept scores as low as 600 for conforming mortgages.\n*   **Larger down payments.** While lenders may approve conventional mortgages with down payments as low as 5% with the inclusion of private mortgage insurance (PMI), jumbo loan issuers typically require down payments of 20% or even as high as 30%. Down payments greater than 20% preclude the need for PMI, but in the rare instance where a lender accepts a down payment lower than 20%, PMI may be required on a jumbo loan just as it is on conforming mortgage loans.\n*   **Greater cash flow.** Mortgage lenders typically look for a debt-to-income (DTI) ratio—calculated by dividing monthly debt payments by gross monthly income—of no more than 36% when issuing jumbo mortgage loans. In contrast, DTIs as high as 50% are acceptable on some conforming mortgages.\n*   **Additional assets.** As a safeguard against the possibility of missed payments on jumbo loans, lenders often require applicants to prove they have access to savings or other liquid assets sufficient to cover as much as one year of loan payments.\n*   **Higher interest rates.** The additional risk associated with non-conforming loans typically leads lenders to bump up interest by 1 or 2 percentage points on jumbo loans compared with the prevailing rates on conventional loans.\n*   **Additional appraisals.** In addition to the standard property appraisal required for any mortgage loan, jumbo lenders may require a \"second opinion\" appraisal to confirm the property's market value. Because properties subject to jumbo loans are often large and unusual in comparison with neighboring properties, each appraisal is likely to be more expensive than one on a more traditional property.\n*   **Higher closing costs.** To help cover the cost of the more extensive verification process required for jumbo loans, lenders typically charge a higher percentage of the purchase price (i.e., more \"points\") as a loan origination costs. END