The mechanics of jumbo loans are the same as any other type of mortgage loan. Lenders verify income, assets and credit to determine if you can repay the loan.
However, the credit standards are higher and you may need to verify enough assets to meet the lender’s “mortgage reserve” requirement. Also known as “cash reserves,” mortgage reserves must come from a liquid account, which means you can quickly turn all or a portion of the asset into cash.
To approve a jumbo loan, a lender typically must:
- Verify enough stable income to qualify
- Confirm a credit score between 700 and 740, depending on your loan amount
- Document enough funds for a down payment
- Document up to 18 months’ worth of cash reserves in a liquid account
- Verify the value of the home, sometimes using more than one home appraisal