1. Max debt-to-income ratio (DTI) for jumbo loans is usually 43% Your DTI is the percentage of your monthly earnings used to pay off all debt obligations and it's used by lenders to determine how large of a monthly mortgage payment you can handle.
As a general guideline, 43% is the highest DTI ratio a borrower can have and still get qualified for a mortgage. Ideally, lenders prefer a debt-to-income ratio lower than 36%, with no more than 28%–35% of that debt going toward servicing a mortgage. 1 The maximum DTI ratio varies from lender to lender.
Bigger down payment
While it's possible to find jumbo loan lenders that will accept a 10% down payment, most will require you to put down at least 20%. That's a lot more than you'll need for a conforming loan, which usually only requires a down payment between 3% to 5% of the home's purchase price.
Standards and guidelines vary, most lenders like to see a DTI below 35─36% but some mortgage lenders allow up to 43─45% DTI, with some FHA-insured loans allowing a 50% DTI. For more on Wells Fargo's debt-to-income standards, learn what your debt-to-income ratio means.
Key takeaways. Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
Most traditional lenders prefer borrowers with a DTI ratio of 36% or less, although some may extend this limit up to 43%.
Jumbo loans work differently than conventional mortgages. These loans have stricter requirements than other types of mortgages, and you'll have to meet very specific property type, down payment, credit score and debt-to-income ratio requirements to get one.
For homes in Los Angeles County, the conforming loan limit is $1,149,825 in 2024. Nearby Orange County is the same amount but in San Bernardino and Kern counties, the limit is $766,550. The Ventura County conforming loan limit in 2024 is $954,500. This means any loan above these amounts is considered a jumbo loan.
Typically, jumbo loan rates are higher than conventional loan rates. Since jumbo loans carry higher loan amounts and pose higher risks to lenders, they often come with higher interest rates. Additionally, jumbo loans may require larger down payments and stricter qualification criteria compared to conventional loans.
For General QMs, the ratio of the consumer's total monthly debt to total monthly income (DTI or DTI ratio) must not exceed 43 percent.
First is the front-end DTI ratio, which measures how much of your gross monthly income will be used on your monthly mortgage payment, including property taxes, mortgage insurance and homeowners insurance.
Debt-to-income ratio of 36% or less
With a DTI ratio of 36% or less, you probably have a healthy amount of income each month to put towards investments or savings. Most lenders will see you as a safe bet to afford monthly payments for a new loan or line of credit.
A loan is considered jumbo if it exceeds the maximum loan limits for Fannie Mae and Freddie Mac conforming loans—currently $766,550 for single-family homes in most parts of the U.S. but up to $1,149,825 in certain more expensive areas.
FHA loans for higher DTI
FHA loans are known for being more lenient with credit and DTI requirements. With a good credit score (580 or higher), you might qualify for an FHA loan with a DTI ratio of up to 50%. This makes FHA loans a popular choice for borrowers with good credit but high debt-to-income ratios.
Loan to value: LTV for jumbo loans may be stricter than a conventional mortgage, often requiring an LTV of 80% or lower. This means that the loan can finance no more than 80% of the property's purchase price.
Debt-To-Income Ratio (DTI)
Conventional loans typically allow a DTI ratio up to 50%, while lower DTIs may result in more favorable terms and interest rates. On the other hand, jumbo loans typically allow a maximum DTI of 45%, although borrowers with 36% or lower may get better terms and rates.
A loan is considered jumbo if the amount of the mortgage exceeds loan-servicing limits set by Fannie Mae and Freddie Mac — currently $806,500 for a single-family home in all states (except Hawaii and Alaska and a few federally designated high-cost markets, where the limit is $1,209,750).
Most lenders require at least 10% of the home's value as a down payment on a jumbo loan, although some may ask for up to 30% to reduce their risk. If you put less than 20% down, you'll likely be required to have private mortgage insurance (PMI) until you have at least 20% equity in your house.
The monthly income rule
"You want to make sure that your monthly mortgage is no more than 28% of your gross monthly income," says Reyes. So if you bring home $5,000 per month (before taxes), your monthly mortgage payment should be no more than $1,400.
Do jumbo loans require mortgage insurance? Making a down payment of less than 20% normally means you have to pay for private mortgage insurance (PMI). That's true for most jumbo loans as well as conforming mortgages. PMI can be pretty expensive — especially for jumbo loans.
This ratio can be as high as 45 percent for manually underwritten mortgages. In the event that the borrower has student loan debt and the payment amount is provided on the credit report, that amount can be used for qualifying purposes.
It does not include health insurance, auto insurance, gas, utilities, cell phone, cable, groceries, or other non-recurring life expenses. The debts evaluated are: Any/all car, credit card, student, mortgage and/or other installment loan payments.
Everybody generally agrees that if 50% or more of your income is going to debt, you need to take action, now. Try to never let your own debt-to-income ratio reach 30%. Consider going to a credit counseling service. Pay off the debt with the higher interest first.