What is a Jumbo Loan in Kansas 2023?

When it comes to purchasing a home, buyers may have difficulty finding 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 construction home in Overland Park or a home in Wichita, let’s break down what a jumbo loan is in Kansas, the 2023 conforming loan limits, and what’s needed to qualify for this type of loan.

What is a jumbo loan?

So what are jumbo loans in Kansas? They are large loans that exceed the loan limits set by the FHFA for conforming loans. Jumbo loans allow borrowers to finance homes that exceed the conforming loan limit, making it possible to buy high-end properties that may not be otherwise affordable.

If you find yourself in a situation where the home you wish to purchase requires borrowing beyond the conforming loan limit (CLL), then you’ll need to pursue a jumbo loan. However, keep in mind that jumbo loans come with higher interest rates and stricter requirements than conventional loans due to the larger loan amounts and risk associated with them. For instance, a larger down payment and a higher credit score may be required to qualify for a jumbo loan in Kansas.

What is the jumbo loan limit in Kansas?

In Kansas, the conforming loan limit is $726,200 across all counties. For example, if you’re buying a home in Johnson County, where the median sale price is $450,000, a loan limit exceeding $726,200 would be 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 home price. So, if you were to put $100,000 down on a $780,000 home in Olathe, the loan would be $680,000, which is under the conforming loan limit for this area. In this case, your loan wouldn’t be considered a jumbo loan.

You can find more information on the conforming loan limits specific to where you’re looking to buy a home in Kansas by using the FHFA map.

What are the requirements for a jumbo loan in Kansas?

To qualify for a jumbo loan in Kansas, borrowers must meet stricter requirements 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: In order to have your loan application approved for a jumbo loan, most lenders will require a credit score of 720 or higher. While some lenders may be more lenient and accept a score as low as 660, a score below this is generally not accepted. In contrast, a credit score as low as 620 could suffice for a conforming loan with some lenders.

Larger down payment: Jumbo loans are a popular financing option for homebuyers looking to buy higher-priced homes. However, compared to conventional loans, jumbo loans typically require a larger down payment. While the exact amount varies depending on the lender and the borrower’s financial profile, down payment requirements for jumbo loans can be as high as 20% or more. It’s worth noting that putting down a larger sum upfront can often help borrowers secure a better interest rate on their jumbo loan.

More assets: Jumbo loan borrowers are typically required to have additional assets. In particular, lenders may require borrowers to demonstrate sufficient liquid assets or savings to cover one year’s worth of loan payments.

Lower debt-to-income ratio (DTI): Mortgage lenders consider a borrower’s debt-to-income ratio (DTI) when evaluating their eligibility for a jumbo loan. To qualify for a jumbo mortgage in Kansas, borrowers typically need a DTI below 43%, though closer to 36% is preferred. The DTI represents the borrower’s monthly debt payments divided by their gross monthly income.

Additional home appraisals: For a jumbo loan, mortgage lenders may require a second home appraisal to ensure that the property’s value is accurate. This is particularly true in regions where there are few comparable property sales. The  appraisal acts as a second opinion and helps the mortgage lender to mitigate their risk. It’s important to note that the cost of a second appraisal may be higher than a typical home appraisal, particularly in areas with fewer sales.

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