When it comes to purchasing a home, buyers may have difficulty finding financing beyond the conforming loan limit. In this instance, you may need to apply for a jumbo loan. So whether your sights are set on a home in St. Louis or sprawling land in Jefferson City, let’s break down what a jumbo loan is in Missouri, the 2024 conforming loan limits, and what’s needed to qualify for this type of loan.
What is a jumbo loan?
So, what exactly is a jumbo loan in Missouri? It’s a mortgage loan that allows borrowers to finance a property that exceeds the conforming loan limit set by the FHFA. In simpler terms, a jumbo loan is a specialized mortgage that enables you to borrow more money than you would be able to with a conventional loan. These loans are typically used to finance high-end or luxury properties in areas with high home prices.
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. Missouri 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 Missouri?
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In Missouri, the conforming loan limit is $766,550 across all counties. For example, the conforming loan limit in St. Louis County is $766,550, so any mortgage that surpasses the loan limit designated for your county by even one dollar is classified as a jumbo loan.
As a reminder, the amount being borrowed 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 Chesterfield, 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.
For more information on the conforming loan limit in your county, use the FHFA map.
What are the requirements for a jumbo loan in Missouri?
To qualify for a jumbo loan in Missouri, borrowers must meet stricter requirements 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 Missouri.
Higher credit score: When it comes to jumbo mortgages, lenders generally look for a credit score of 720 or above to qualify a borrower. While some lenders may accept a score as low as 660, this is typically the lowest threshold for qualification.
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 finances, 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 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 a non-conforming loan, Missouri lenders typically look for a borrower with a debt-to-income ratio (DTI) below 43%. Ideally, a DTI closer to 36% or lower is preferred. The DTI is calculated by dividing the sum of all monthly debt payments by gross monthly income. A lower DTI signifies a borrower’s ability to manage their current debt load while taking on additional mortgage payments. It also indicates greater financial stability and the ability to make on-time payments towards their jumbo mortgage.
Additional home appraisals: A home appraisal is required whenever a homebuyer receives financing for their home purchase. However, for jumbo loans, your lender may require an additional appraisal. In areas with limited comparable property sales, this appraisal can be more expensive than in cities with higher sales rates.
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