Qualifying For A Jumbo Loan in New York City
Many homebuyers use jumbo loans to buy in New York City. This article discusses what a jumbo loan is, the advantages and disadvantages of jumbo loans, and the steps you need to take to qualify for this type of loan.
Jumbo Loan Limits
Jumbo loans exceed the conforming loan limits set by Fannie Mae and Freddie Mac. Since New York City is considered a high-cost area, loan limits are higher than those in most other parts of the country.
Fannie Mae and Freddie Mac increased the conforming loan limit in New York City to $970,800 in 2022. This means that any loan amount over this threshold qualifies as a jumbo loan with more stringent requirements.
Qualifying For A Jumbo Loan
Because jumbo loans exceed conforming loan limits lenders are exposed to greater levels of risk on these loans, so they have implemented the following higher standards for qualifying for this type of loan:
- A credit score of at least 700
- Debt-to-income (DTI) ratio of no higher than 43 percent
- Usually a down payment of 20% or more
Lenders also need to verify that you have a strong, steady income to make the higher payments required with a jumbo loan.
Advantages of Jumbo Loans
The primary advantage of jumbo loans is that you have more freedom in shopping for homes. You also only need to take out a single mortgage. Without jumbo loans homebuyers would often need to piece together several loans from different sources to fund their purchase. A jumbo loan with one monthly payment becomes a much more attractive option for most buyers.
Disadvantages of Jumbo Loans
Since the loan balance is much higher on jumbo loans, you will pay more in closing costs when you purchase with a jumbo loan. Jumbo loans also require buyers to report enough liquidity cover mortgage payments for six months instead of the two-month requirement for conforming loans.
The Bottom Line
Qualifying for a jumbo loan in New York City differs from qualifying for this type of loan in other parts of the country. Since New York City is a high-cost area, the jumbo loan requirements are higher, resulting in more stringent requirements.
To qualify for a jumbo loan, you must have excellent credit and cash reserves to pay for at least six months of mortgage payments. However, jumbo loans give you more freedom in your home search and allow you to purchase properties that you otherwise wouldn’t be able to with a conforming loan.