Are you planning to buy a luxurious home in Tennessee or a home in an expensive market this year? If so, you might be wondering what a jumbo loan is and whether it’s right for you.
What is a jumbo loan?
Jumbo loans in Tennessee are a specialized type of mortgage that allows borrowers to finance higher-priced properties that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These loans are designed to meet the financing needs of luxury homes and properties located in high-cost areas.
If the loan amount needed to buy the home is more than the conforming loan limit, you’ll need a jumbo loan. However, it’s important to note that jumbo loans come with higher interest rates and stricter requirements than conventional loans due to the larger loan amounts and risk associated with them. For instance, a larger down payment and a higher credit score may be required to qualify for a jumbo loan in Tennessee.
What is the jumbo loan limit in Tennessee?
In 2023, the conforming loan limit for a single-family home in most markets is $726,200. However, these limits can vary depending on where you’re buying a home in Tennessee.
- $726,200 is the conforming loan limit in most Tennessee counties
- $890,100 is the maximum limit in Tennessee’s more expensive counties
As a reminder, the loan amount is what determines whether or not you’ll need a jumbo loan, not the price of the home you’re buying. So, if you were to put $100,000 down on a $780,000 home in Chester County, the mortgage would be $680,000, which is under the CLL for this area. In this case, your loan wouldn’t be considered a jumbo loan.
The following counties in Tennessee have a conforming loan limit beyond $726,200 for 2023:
| County | FHFA Conforming Loan Limit |
| Cannon County | $890,100 |
| Cheatham County | $890,100 |
| Davidson County | $890,100 |
| Dickson County | $890,100 |
| McNairy County | $890,100 |
| Robertson County | $890,100 |
| Rutherford County | $890,100 |
| Smith County | $890,100 |
| Sumner County | $890,100 |
| Trousdale County | $890,100 |
| Williamson County | $890,100 |
| Wilson County | $890,100 |
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 Tennessee?
As previously mentioned, the requirements for a jumbo loan are much more stringent than the requirements for a conforming loan. Each lender may have different requirements or processes, but below are the typical requirements for borrowers seeking a jumbo loan.
Higher credit score: To qualify for a jumbo loan, borrowers typically need to have a credit score of at least 720. However, some lenders may be willing to accept scores as low as 660, although less frequently. A higher credit score demonstrates a borrower’s ability to manage credit responsibly and is a crucial factor that lenders evaluate when considering jumbo loan applications.
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: Jumbo loan borrowers are typically required to have additional assets. In particular, lenders may require borrowers to demonstrate sufficient liquid assets or savings to cover one year’s worth of loan payments.
Lower debt-to-income ratio (DTI): When applying for any type of mortgage, lenders will review your debt-to-income (DTI) ratio to assess your financial behavior and creditworthiness. The DTI ratio is calculated by dividing your total monthly debt payments by your gross monthly income. For conforming loans, some lenders may accept a DTI as high as 50%. However, for jumbo mortgages in Tennessee, borrowers are typically required to have a DTI under 43%, with a preference for a ratio closer to 36%. Maintaining a lower DTI can demonstrate financial stability and improve your chances of being approved for a jumbo loan with favorable terms.
Additional home appraisals: When you buy a home in Tennessee, your lender will require a home appraisal to confirm that the property’s value is equal to or higher than the loan amount. In some cases, a lender may require an additional appraisal for a jumbo loan. In housing markets with very few comparable property sales, the cost of the appraisal may be higher than in places with more frequent sales.
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