Depending on the loan amount you need and where you’re buying a home in Illinois, you may find it difficult to find financing beyond the conforming loan limits. If this is the case, you may need a jumbo loan. Whether your sights are set on a luxurious home in Chicago or a large property in Springfield, join us as we delve into the intricacies of jumbo loans in Illinois in 2024.
What is a jumbo loan?
Jumbo loans in Illinois 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 you find yourself in a situation where the home you’re planning to buy requires borrowing beyond the conforming loan limit (CLL), then you’ll need to pursue a jumbo loan. Illinois 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.
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What is the jumbo loan limit in Illinois?
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In Illinois, the conforming loan limit is $766,550 across all counties. For example, if you’re buying a home in Cook County, where the median sale price is $300,000, a loan limit exceeding $766,550 would be considered a jumbo mortgage.
As a reminder, the amount being borrowed is what determines whether or not you’ll need a jumbo loan, not the price of the home. So, if you were to put $50,000 down on a $750,000 home in Chicago, 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. In this case, your loan wouldn’t be considered a jumbo loan.
You can find the conforming loan limits for your county by using this FHFA map.
What are the requirements for a jumbo loan in Illinois?
The requirements to qualify for a jumbo loan are more stringent than the requirements 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.
Higher credit score: To qualify for a jumbo mortgage, 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 an important factor that lenders evaluate when considering jumbo loan applications.
Larger down payment: Jumbo loans typically require larger down payments than conforming loans. While the exact amount varies depending on the lender and the borrower’s financial situation, down payment requirements for jumbo loans can be as high as 20% or more. That said, some lenders may offer jumbo loans with down payments as low as 10%, provided the borrower meets certain credit and income requirements.
More assets: Jumbo loan lenders generally require borrowers to demonstrate a strong financial profile, including substantial liquid assets or savings. To qualify for a jumbo loan, borrowers must have enough reserves to cover at least one year of mortgage payments. This requirement ensures that borrowers have the financial flexibility to meet their loan obligations in the event of a financial hardship.
Lower debt-to-income ratio (DTI): To qualify for a jumbo loan in Illinois, a mortgage lender will typically look for a debt-to-income (DTI) ratio of no higher than 43%, and ideally closer to 36%. The DTI is calculated by dividing the sum of all monthly debt payments by the borrower’s gross monthly income. This requirement ensures that borrowers have a strong ability to repay their loan and manage their debt.
Additional home appraisals: For a jumbo loan, a mortgage lender may require a second appraisal to ensure that the property’s value is accurate. This is particularly true in housing markets where there are few comparable property sales. The appraisal acts as a second opinion and helps the lender to mitigate their risk. It’s important to note that the cost of another appraisal may be higher than a typical home appraisal, particularly in areas with fewer sales.
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