In Colorado and the US, jumbo loans are used to purchase real estate (the amount borrowed) that exceeds the current conforming limit for a conventional conforming loan.
Standard limits on “conventional loans” cap the amount a lender can extend to a borrower. If you are looking to buy a more expensive home, you can borrow more with jumbo mortgages.
The Federal Housing Finance Agency (FHFA) drafts the guidelines which are cascaded down to the two federally governed entities that it regulates, Fannie Mae and Freddie Mac. It limits borrowers’ potential maximum loan amount (down payment vs. purchase price and resulting borrowed amount) on any single loan.
The new 2023 max baseline conforming loan limit for most counties (not adjusted for higher-cost counties) is $726,200. In high-cost counties, the loan limit is up to $1,089,300. A Jumbo loan could be useful if you want to borrow more than the conforming loan limits. You can look up the conventional loan limits by county here.
The Colorado conforming loan limits for 2023 increased 12.21% over last year to keep up with rising housing costs and inflation. The 2023 baseline limit for most counties is now $726,200. Check the table below to search by county, as some areas are considered “high-cost areas” as high as $1,089,300.
If you need to borrow more, consider a Colorado Jumbo loan.
When you get a home loan, there is a limit to how much you can borrow.
On the borrower level, the amount you can borrow and terms are determined by the borrower’s financial picture (income, debt, creditworthiness, etc.).
On the lending level, the max amount a lender can extend in a conventional loan is set by the conforming loan limits.
If you need to exceed the limit, consider a Jumbo loan.
Since the government is not backing a jumbo loan, there are fewer limitations on the types of properties you can purchase using a jumbo loan. If you meet your lender’s requirements, you can use a jumbo loan for a primary residence, single-family home, investment properties, or vacation home.
You can borrow more to purchase a higher-priced home.
Pricing for a jumbo loan can sometimes be better.
A reduced down payment as opposed to using a conforming loan limit and having to make up the difference in cash.
You can buy down rates (points) to reduce the rates.
Jumbo mortgages go through manual underwriting, which may mean you have more requirements to meet.
Higher borrowed amounts are riskier for lenders and this comes with higher rates or cash reserve requirements.
89.9 LTV (Loan to Value), but many lenders require a 15-20% down payment
Like a conventional mortgage, a jumbo loan will come with terms and a repayment schedule, but they work differently because private equity investors set the lending criteria. Some investors may be happy to lend against less demanding criteria but will charge a high premium in interest rate to offset the risk in doing so. Some investors may focus on cash reserves stored away.
Credit Score: Requirements will vary but typically 620 and up; it could be lower, but that will drive your rate up.
Debt-to-Income Ratio (DTI): Lenders will pay close attention to your DTI to ensure you won’t become overwhelmed by your mortgage payment.
Cash Reserves: Many jumbo loans want to see cash reserves. Borrowers must show they have enough reserves to meet the criteria; this amount will vary.
Closing Costs and Fees: A jumbo loan will have closing costs and fees similar to conventional ones.
Larger Down Payments: Jumbo loans commonly require a larger down payment of 20-25%, but this will depend heavily on the lender.
Keep in mind there are other options on the table when you need to borrow more than the conforming limits. An experienced mortgage broker will be able to review your needs and see if an alternative is in your best interest. Alternatives to Jumbo Loans include: a combination of a max conventional conforming loan + HELOC or an interest-only loan. Talk with a Nathan Mortgage broker to see which is best for you and can save you the most money. Variables that will be considered include how large down payment will be, ideal monthly payment, lower rates, credit scores, and more.
Making Homeownership Possible in the Most Expensive Markets
If you’re looking in areas of real estate where the prices are a little loftier than most, you may need a jumbo loan.
Jumbo loans are useful for helping qualified borrowers purchase homes in areas with higher home values. In contrast, they wouldn’t be able to do so prior due to a lack of enough resources to pay for the amount over the max conforming loan limits.
The increasing cost of housing is one reason why conformance loans are increasing year on year. In the state of Colorado, median home prices grew 10.9% in December 2022. In different regions of the state, the increase in home prices was even higher and the increase in house prices reached $456.721 by year-end in Colorado Springs. As a result of this increase, the conforming lending limit was increased by the Federal Housing Finance Agency (FHFA).
Yes, VA does offer jumbo loans to service members who qualify. Generally speaking, jumbo loans are not backed by government mortgage programs, but there is always an exception to the rule, and in this case, it would be the VA.
Loan limits are based on the VA’s risk tolerance and the other limiting factor would be if the borrower had already partially used their VA benefit, reducing what they could qualify for on an additional home, if any. With a VA jumbo loan, it must be for your primary residence, not an investment property or vacation home. Property standards will apply to a VA jumbo loan.
Our Colorado Nathan Mortgage broker team can help you find the perfect mortgage. One of our top-selling loan types is the Jumbo loan. We help hundreds of homeowners get into more expensive counties. Get expert advice and support that is not commission driven and is unbiased.
We have access to wholesale pricing and more end investors than banks. We look at all scenarios to determine what is in your best interest. Our expert will evaluate if a conventional + HELOC or a Jumbo mortgage will best suit your finances and home goals.