When it comes to purchasing a home, buyers may find it difficult to find financing beyond the conforming loan limit. This is where jumbo loans come into play.
What is a jumbo loan?
A jumbo loan is a type of mortgage that’s designed to help you finance the purchase of a home that exceeds the limits set by the Federal Housing Finance Agency. In Massachusetts, this type of loan is often needed for high-end homes or properties located in expensive housing markets like Boston. With a jumbo loan, you can get the financing you need to buy your dream home, even if it’s more expensive than what a conventional loan can finance.
If you find yourself in a situation where the home you wish to purchase requires borrowing beyond the conforming loan limit (CLL), then you’ll need to pursue a jumbo loan. Massachusetts 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 Massachusetts?
In 2023, the conforming loan limit for a single-family home in most markets is $726,200. But in Massachusetts, the jumbo loan limit varies based on the county you’re buying a home in.
- $726,200 is the conforming loan limit in most Massachusetts counties
- $828,000 is the maximum limit in Massachusetts’ more expensive counties
Keep in mind that 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 Berkshire 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.
The following counties in Massachusetts have a conforming loan limit beyond $726,200 for 2023:
| County | FHFA Conforming Loan Limit |
| Dukes County | $1,089,300 |
| Essex County | $828,000 |
| Middlesex County | $828,000 |
| Nantucket County | $1,089,300 |
| Norfolk County | $828,000 |
| Plymouth County | $828,000 |
| Suffolk County | $828,000 |
Additional information regarding the conforming loan limits in Massachusetts can be found here.
What are the requirements for a jumbo loan in Massachusetts?
Borrowers must meet stricter requirements to qualify for a jumbo loan than they would 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 in Massachusetts.
Higher credit score: In order to be eligible for a jumbo loan, lenders generally require borrowers to have a credit score of at least 720. While some lenders may consider a score as low as 660, a credit score of less than that is typically not accepted.
Larger down payment: Obtaining a jumbo loan in Massachusetts typically requires a larger down payment compared to a conforming loan. Lenders may require a down payment of 10% to 20% or more, depending on the specific loan program and the borrower’s financial situation. If you’re approved with a down payment less than 20%, keep in mind you’ll most likely be required to purchase private mortgage insurance (PMI).
More assets: During the asset review process, lenders typically request that jumbo loan borrowers provide evidence of sufficient liquid assets or savings to cover the equivalent of one year’s worth of loan payments.
Lower debt-to-income ratio (DTI): Lenders look at a borrower’s DTI (debt-to-income ratio) to assess their creditworthiness and spending habits. For a conforming loan, a DTI as high as 50% may be acceptable to some lenders. However, jumbo loan borrowers are required to have a lower DTI, ideally under 43% and closer to 36%. This is because jumbo loans are riskier for lenders due to the larger loan amounts. Applicants with a higher DTI may still qualify for a jumbo loan, but it could result in a higher interest rate or a stricter approval process.
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 places with limited comparable property sales, this additional appraisal may cost more than in neighborhoods with more frequent sales.
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