What is a Jumbo Loan in Connecticut 2023?

When it comes to purchasing a home, buyers may find it difficult to find financing beyond the conforming loan limit. If this is the case, you may need a jumbo loan. Whether your sights are set on a new home in Hartford or a townhome in New Haven, let’s break down what a jumbo loan is in Connecticut, the 2023 conforming loan limits, and what’s needed to qualify for this type of loan.

What is a jumbo loan?

What exactly is a jumbo loan in Connecticut? A jumbo loan is a specialized type of mortgage that comes into play when you’re seeking financing for a home that surpasses the conforming loan limits (CLL) established by the Federal Housing Finance Agency (FHFA). Typically, this type of loan is necessary for upscale, luxurious properties or those situated in pricey housing markets.

If the loan amount needed is more than the CLL, you’ll need a jumbo loan. Connecticut 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.

What is the jumbo loan limit in Connecticut?

In Connecticut, the conforming loan limit is $726,200 across all counties. For example, the conforming loan limit in Hartford County is $726,200, so if the loan amount needed is even one dollar more than this amount, it’s considered a jumbo loan.

Keep in mind that the amount being borrowed is what determines whether or not you’ll need a jumbo loan, not the price of the home. So, if you were to put $50,000 down on a $750,000 home in Windsor, 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.

To identify the conforming loan limits where you’re considering buying a home in Connecticut, check out this FHFA map. 

What are the requirements for a jumbo loan in Connecticut?

Borrowers must meet stricter requirements to qualify for a jumbo loan 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.

Higher credit score: To qualify for a jumbo mortgage, borrowers typically need to have a credit score of at least 720. However, some lenders may be willing to accept scores as low as 660, although less frequently. A higher credit score demonstrates a borrower’s ability to manage credit responsibly and is an important factor that lenders evaluate when considering jumbo loan applications.

Larger down payment: Purchasing a high-priced home usually requires a larger down payment from the buyer. Conventional loans may offer programs for down payments as low as 3%- 5%, but non-conforming loans require a minimum down payment of 10%, with some lenders requiring up to 30%. If the buyer puts down less than 20%, they will likely need to pay for private mortgage insurance (PMI).

More assets: Jumbo loan borrowers are typically required to have more assets than those seeking conventional loans. Lenders will review a borrower’s assets to ensure they have enough liquid assets or savings to cover at least one year of loan payments. This requirement is in place to mitigate the increased risk associated with larger loan amounts.

Lower debt-to-income ratio (DTI): When applying for a jumbo mortgage, Connecticut 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 loan.

Additional home appraisals: When you buy a home in Connecticut , your 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 places with very few comparable property sales, the cost of the appraisal may be higher than in places with more frequent sales.

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