What is Considered a Jumbo Loan in Arizona?

If you are eyeing a luxury property or high-end home above the market’s average, a conventional loan won't be enough to fund the purchase. The question is, where do you go to finance such a large purchase?

The good news is that properties in Arizona priced higher than the conforming loan limits can still be had by applying for a jumbo loan. 

Let’s take a look at how jumbo loans work and what the current loan limits are in Arizona.

What is a jumbo loan in Arizona?

Jumbo loans exceed conforming loan limits set by government-backed agencies like Freddie Mac and Fannie Mae and are a good option if you want to buy an expensive home. Conforming loan limits vary by state and type of market. 

To qualify for a jumbo loan, you should have a low DTI, higher credit score, and should be able to pay a larger down payment since lenders are taking on a higher risk.

Jumbo loans aren’t just used for primary homes, many high-end buyers use this loan type for investment properties and vacation homes.

What are the usual requirements when you apply for a jumbo loan?

Jumbo loans and conventional loans differ in loan amounts and requirements. There are stricter requirements because jumbo loans are not guaranteed by Fannie Mae or Freddie Mac which means lenders aren’t protected from losses if a borrower defaults.

Here are the typical requirements you may encounter when applying for a jumbo loan in Arizona.

Credit scores

With the higher risk involved, most lenders won’t consider buyers with a credit score lower than 700. Unlike in a conventional loan, where you can get a loan with a credit score as low as 620. 

Debt to income ratio

A DTI of 43% or less for conventional loans is typically sufficient for approval. However, a lower DTI is often required for a jumbo loan since a higher monthly income ensures that you can pay back the loan. Therefore, a good DTI range to aim for would be between 43% to 36%.

Down payment

In some cases, borrowers of conventional loans may pay as low as a 3% down payment. With jumbo mortgages, the required down payment will usually be higher. You also don’t pay for PMI or private mortgage insurance with jumbo mortgages, which is another reason a higher down payment is required. 

Generally, the down payment is based on the loan amount and credit score. So for a jumbo loan, you can expect a down payment requirement of about 20%.

Income

There are stricter guidelines when proving your financial health, so be prepared to have a lengthy discussion about your financial situation when applying for a jumbo loan. Items you’ll need to disclose are any liquid assets and proof of stable income, which may require extensive documentation. 

Prepare by gathering at least two years' worth of tax returns, bank statements, W2s, and 1099s, although additional documentation may be required to demonstrate that your income is unlikely to change after loan approval.

You may also need to show that you have enough cash reserves to cover at least one year of mortgage payments.

Property Appraisals

To qualify for a jumbo loan in Arizona, a property appraisal should be done and show that the loan amount matches the value or purchase price of the home. Note that you may be required to get multiple property appraisals to ensure the accuracy of the numbers involved in the loan.

What are the conforming loan limits in Arizona in 2022?

The current conforming loan limit in Arizona for 2022 is $647,200, while 2-unit properties have a limit of $828,700. Homes that are priced higher would need jumbo mortgages to get funded.

On the other hand, Jumbo loan limits are in the millions of dollars, ranging from $2-5 million. Please contact us for current jumbo loan limits. 

Are you ready to apply for a jumbo loan in Arizona?

Wouldn’t it be great to live in a community you desire, even if the price exceeds the conforming loan limits set by Fannie Mae and Freddie Mac? A jumbo loan is the answer to purchasing your dream home without selling your current assets.

Jumbo loans come in various terms and repayment schedules. You can choose between fixed or adjustable rates.

Our jumbo loan experts at Castle Rock Mortgage can help you find the best jumbo loan option. You’ll be surprised at how competitive our rates are compared to conventional loans, plus you may also apply for tax deductions on the interest on your jumbo.

 


* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.