In 2023, a handful of U.S. buyers won’t need a jumbo loan even if borrowing over $1M. While loan caps are lower elsewhere, the increase affects over 2M homes.
SEATTLE – More than 2 million U.S. homes no longer require a jumbo loan, according to a new analysis by Zillow Home Loans. That means some buyers will have additional for-sale inventory to consider if they need financing. The study estimates that an additional 2 million U.S. homes now qualify for a conventional mortgage.
The change is due to the Federal Housing Finance Agency’s (FHFA) recent increase of conforming loan limits to $1,089,300 in some high-cost markets. Loans above the cap won’t be considered by mortgage-bakers Fannie Mae and Freddie Mac and, as a result, are called jumbo loans.
Compared to conforming loans, jumbo loans typically require a higher credit score – 700 is the minimum that many lenders accept for a jumbo loan, versus 620 that many require for a conforming loan. Jumbo loans also often require 20% down, although some call for even higher down payments. Some jumbo loans also will require proof of larger cash reserves than conventional loans (up to 12 months’ worth).
For most of the country, the conforming loan requirement increased by $79,000 – going from $647,200 in 2022 to a baseline of $726,200 in 2023. In the most expensive parts of the county (103 counties), the conforming loan limit was raised to $1,089,300, topping the $1 million mark for the first time. These counties are largely concentrated in the nation’s most expensive metro areas, along the coasts and in the Mountain West.
“The addition of 2 million homes that now qualify for conforming loan options across the county is welcome news for homebuyers entering a shopping season with fewer homes on the market,” says Nicole Bachaud, Zillow Home Loans senior economist. “Home price appreciation has slowed significantly, and this means that homes nearing jumbo loan territory will stay eligible for conforming loans longer than we have seen in the last few years.”
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