More than 2 million homes nationwide no longer require a jumbo loan, giving homebuyers additional inventory that is covered by a more accessible financing option, according to a new analysis by Zillow. 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. Zillow said the change may be welcome for buyers looking to purchase a home in the coming shopping season, as jumbo loans often come with additional fees and more stringent qualification standards, making them less affordable for many buyers.

Compared to conforming loans, jumbo loans typically require a higher credit score versus a score that many require for a conforming loan. Jumbo loans 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. For the majority 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 country, equivalent to 103 counties, the conforming loan limit was raised to $1,089,300, topping the $1 million mark for the first time. While home price appreciation has begun to plateau, home prices are still significantly higher than a year ago.

Source: National Mortgage Professional