Florida’s housing market is a unique landscape. There are a variety of different properties and cities, which makes knowing how to navigate the housing market important when thinking about buying property in the Sunshine State, especially high-value property.
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Jumbo mortgages are the most common type of loan sought by those seeking to buy high-value property. They exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA) and are designed to help purchase luxury properties with a much higher purchase price than other real estate options.
The main thing to understand about jumbo loans is that since they’re not conventional loans, they have their own eligibility requirements, which can vary by state.
What is a Jumbo Loan Limit in Florida?
Conforming loan limits can change depending on several factors, but as of 2024, they are $766,550 for a single family home. This is comparable to the vast majority of the United States. In Florida, most counties have this loan limit, but in expensive counties like Monroe County, the loan limit increases to $929,200. If you need a loan higher than the conforming loan limits, you will need to look into jumbo mortgages.
Why Jumbo Loans Matter in Florida
Florida’s housing market is known for its high property values, especially in certain areas of South Florida, like the Florida Keys, Miami, and Fort Lauderdale. These areas have a high demand for luxury homes, large condo buildings, and waterfront properties, increasing the need for jumbo loans.
Many homebuyers and investors can’t buy high-value properties outright, which is why they apply for jumbo mortgages. These loans offer them a much higher loan amount so they can afford to purchase a luxury property.
Another reason jumbo loans are so important in Florida is its economy. The state has a flourishing economy, great climate, and attractive lifestyle that attracts families, individuals, and investors with significant net worth. The more high-net-worth individuals move to Florida, the more jumbo loans are needed.
Jumbo Mortgage Eligibility Requirements in Florida
Being able to qualify for a jumbo loan isn’t the same as qualifying for a standard conventional loan. Both have eligibility requirements, but jumbo mortgages are a little more strict. If you’re considering applying for a jumbo loan in Florida, these are the eligibility requirements you’ll need to consider.
Credit Score and Credit History
Borrowers must meet the minimum credit score requirements to be considered for jumbo mortgages. Usually, the minimum credit score requirement for these loans is between 680 and 700. While there is a minimum requirement, the higher the credit score, the better.
The higher the borrower’s credit score, the better the loan terms and interest rates can be. A good credit history and score make the borrower low-risk, and a lender will be more likely to offer more favorable terms.
Down Payment Requirements
Since traditional down payments are around 10% of the home’s value, borrowers are expected to pay 20% or more when buying a high-value home. Most lenders will generally only offer jumbo loans to those who can pay at least 20% of the property’s value because this shows they have the funds and contributes to a lower risk for the lender.
Lenders might allow borrowers to make a down payment of less than 20% of the home value in some situations, but they require the borrower to have private mortgage insurance (PMI). Private mortgage insurance helps protect the lender if the borrower defaults on the loan.
If you’re considering a Florida jumbo loan, being able to provide at least 20% is the best option because PMI adds another cost to purchasing the property.
Debt-to-Income Ratio (DTI)
Mortgage lenders will also assess a borrower’s debt-to-income ratio (DTI). With conventional loans, the DTI can be lower, but with jumbo loans, generally, it’s around 43% or lower. You can determine your DTI by dividing your monthly debt payments by your gross monthly income.
This will give you your current debt-to-income ratio, so you know where you stand and if you need to focus on lowering it. The lower your DTI, the better your chance of getting approved for a jumbo loan.
Income and Employment Verification
You’ll also need to provide income and employment verification information to the lender when applying for a Florida jumbo loan. Any home loan will require you to show consistent income and employment status, but it’s especially important for jumbo loans. A few things you can provide your mortgage lender to verify this information is:
- Pay stubs
- Tax returns
Those borrowers who are self-employed will face even more scrutiny from lenders. In addition to pay stubs and tax returns, you’ll likely need to provide business tax returns and profit and loss statements.
Asset and Cash Reserve Requirements
Lastly, you must demonstrate your financial situation to establish that you can repay the home loan. This part of the jumbo loan application requires you to show any cash reserves and other assets you have. This helps jumbo lenders have a better idea of if you have the money to cover several months of your mortgage payments before even taking out the loan.
Additional Factors Impacting Jumbo Loan Qualification Florida
Besides employment verification, your DTI, and your credit report, some additional factors can determine whether you qualify for jumbo mortgages.
Property Appraisal and Valuation
By now, you probably realize there are stricter guidelines regarding approval for jumbo loans. A factor many don’t realize plays a role is property appraisal and valuation. A jumbo mortgage loan requires much stricter appraisal standards than conforming loans.
The condition of the property and its location will play a huge role in whether you get the jumbo mortgage or not. Since lenders are offering a higher loan amount, they want to ensure the amount is comparable to the property’s value. This can make the appraisal process longer and more tedious.
Loan Type and Term
The type of loan will affect your terms. Fixed-rate mortgages are better for stability and help borrowers make consistent payments. Adjustable-rate mortgages (ARMs) offer lower interest rates in the beginning, but they can adjust over the course of the loan term.
Lender Overlays
Every mortgage lender operates differently. Even with the standard eligibility requirements of a jumbo mortgage, lenders might have their own set of guidelines for offering jumbo loans to borrowers. The best thing to do is to look into different lenders to compare loan offers and see which one is best for you.
Specific Considerations for Jumbo Loans in Florida
Since jumbo mortgages aren’t given out often and require more consideration from the lender before receiving a loan offer, it’s no surprise there are factors like location and type of property that impact your offer.
High-Cost Areas: Monroe County (The Keys)
Certain areas of Florida, like the Florida Keys, will have a higher jumbo loan limit than other areas of the state. Monroe County has some of the highest-valued property in the state, hence the higher loan limits. Not only are the homes appraised for a high amount, but their location also increases the price, as does the county’s requirement that homeowners have flood insurance.
Your financial planning must include the additional cost of flood insurance and high property values.
Investment Properties and Second Homes
It’s already difficult enough for some to qualify for a jumbo loan for their primary residence. For those looking to get a jumbo loan to buy investment properties or vacation homes in Florida, the challenges are greater.
There’s a greater risk associated with investment properties and second home loans, so lenders will usually require a larger down payment and have stricter requirements other than the minimum that they might require for a primary residence.
Condo and Co-Op Financing with Jumbo Loans
Like investment properties and second homes, condominiums and co-ops require additional effort to be approved for a jumbo loan. Since these properties have a lot of different layers, you’ll need to meet higher reserve amounts, higher credit scores, and more.
Strategies for Improving Jumbo Loan Qualification
If you need to apply for a jumbo mortgage, you’ll want to set yourself up for success. Here are some strategies you might want to consider when trying to qualify for a jumbo mortgage in Florida:
- Focus on improving your credit score by paying off debts and maintaining low credit card balances
- Lower your DTI by paying off debt and not taking on more
- Start saving for at least 20% of the home’s value
- Maintain employment to ensure consistent income
- Work with lenders who have experience with jumbo loan applications
Navigating the Jumbo Loan Landscape in Florida
Jumbo loan applicants face many challenges in the mortgage process that other borrowers might not. From needing detailed bank statements to a high credit score, they’re under much more scrutiny when they submit their home loan application.
Working with experienced and professional jumbo mortgage lenders will enhance your chance of being approved with favorable loan terms in Florida. District Lending’s goal is to help people secure the properties of their dreams.
As your trusted mortgage broker, we’ll help you explore your financing options and get the lowest interest rates possible for your jumbo mortgage. If you’re ready to see what District Lending can do to help, contact us today.
