When it comes to purchasing a home in Michigan, buyers may have difficulty finding financing beyond the conforming loan limit. If this is the case, you may need a jumbo loan. Whether your sights are set on a home in Grand Rapids or a condo in Detroit, let’s break down what a jumbo loan is in Ohio, the 2023 conforming loan limits, and what’s needed to qualify for this type of loan.
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 Michigan, this type of loan is often needed for high-end homes or properties located in expensive housing markets. 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 standard mortgage can cover.
If the home you’re purchasing will require you to borrow more than the conforming loan limit (CLL), you’ll need to apply for a jumbo loan. However, because of the larger loan amounts and the risk involved, jumbo loans often come with stricter requirements and higher interest rates than conventional loans. Lenders typically require a larger down payment, higher credit score, and more assets on hand to qualify for a jumbo loan in Michigan.
What is the jumbo loan limit in Michigan?
In Michigan, the conforming loan limit is $726,200 across all counties. For example, the conforming loan limit in Wayne County is $726,200, so any mortgage that surpasses the loan limit designated for your county by even one dollar is classified as a jumbo loan.
Keep in mind that the loan amount is what determines whether or not you’ll need a jumbo loan, not the home price. In this case, your loan wouldn’t be considered a jumbo loan. So, if you were to put $100,000 down on a $780,000 home in Detroit, the loan would be $680,000, which is under the conforming loan limit for this area. In this case, your loan wouldn’t be considered a jumbo loan.
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 Michigan?
As previously mentioned, the requirements for a jumbo loan are much more stringent than the requirements for a conforming loan. The specific requirements can vary from lender to lender, but below are the typical requirements for borrowers seeking a jumbo loan.
Higher credit score: In order to be eligible for a jumbo mortgage, lenders generally expect 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 mortgage 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: 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): To qualify for a jumbo loan in Michigan, lenders typically look for a debt-to-income ratio (DTI) 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: When you buy a home in Michigan, your mortgage 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 regions with very few comparable property sales, the cost of the appraisal may be higher than in places with more frequent sales.