If you are a homebuyer in Texas, you might have come across the term “Jumbo” loan. So, what is considered a jumbo loan in Texas and how does it differ from a conventional loan? In simple terms, a jumbo loan is a mortgage that exceeds the loan limits set by Fannie Mae and Freddie Mac. In Texas, the loan limit for a conforming loan is $766,550. Anything beyond this limit is considered a jumbo mortgage.
Jumbo loans are becoming increasingly popular in Texas due to the rising cost of homes in certain cities, especially Dallas, Houston, Austin, and San Antonio. A jumbo loan gives homebuyers the option to purchase a higher-priced home than they would be able to with a conventional loan. The loan amount for a jumbo loan varies depending on the lender and the location of the property. As mentioned earlier, in Texas, the basic 2024 conforming loan limit is $766,550. However, this amount differs in other states as high-cost locations have even greater conforming loan limits.
To qualify for a jumbo loan in Texas, you must generally have a credit score of at least 680. Additionally, buyers should have sufficient income to cover their mortgage payments and other debts as well as maintain a healthy debt-to-income. Additionally, most jumbo lenders require a down payment of at least 10%, however, new 5% down Jumbo purchase options have recently emerged. Please check the Jumbo Purchase page above for the latest requirements.
Borrowers should be prepared to pay a slightly higher interest rate than what is typically available on conforming loans. Jumbo mortgage rates in Texas are currently 0.50%-0.75% higher when compared to a conventional loan of the same amount. However, qualified borrowers do have piggyback combo loan options to help offset the rate difference.
Piggyback loans are used to help borrowers avoid mortgage insurance (PMI). Additionally, they are sometimes used when a borrower does not have the full 20% for a down payment. These loans typically include two separate loan amounts; one is for 80% of the purchase price and the second is for 10-15% of the purchase price.
Doing this will also allow a borrower can often take advantage of lower conforming loan rates on their primary first mortgage and lower their monthly payments.
Homebuyers should understand that these programs require full income and asset documentation. This includes documenting income with paystubs, W2s, and tax returns. Any down payments and closing costs will also need to be sourced and verified much like regular conventional or FHA loans. The exception to this is self-employed buyers utilizing the bank statement deposit program.
If you are a homebuyer planning on purchasing a home in Texas, it is important to understand what a jumbo loan is and how it differs from a conventional loan. The minimum down payment required for a jumbo loan varies depending on the lender and the location of the property. So, it is best to do your research and compare options to find the best fit for you.
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