Mortgage loan limits are available for every U.S. county, as published by Fannie Mae and Freddie Mac, and the FHA. Loan sizes that exceed loan limits are considered "jumbo". With a Conforming (20% down Fannie Mae-Freddie Mac conforming) mortgage you can purchase with a $598,000 loan limit. With FHA, (less than 20% down) you have a $729,750 loan limit. You should try to stay under these limits.
While the underwriting process for jumbo mortgages is similar to that of a conforming mortgage, the requirements differ.
"There is no (private mortgage insurance) with a jumbo mortgage, so the down payments are larger and, usually, the credit score can be no lower than 700.
The maximum debt-to-income ratio for jumbo loan borrowers is 45 percent. Additionally, jumbo borrowers need at least six months' worth of reserves in their bank accounts after closing, while conforming loan borrowers may be required to only have one or two months' worth of mortgage payments set aside. The required reserve amount for jumbo borrowers can sometimes be 20 percent of the loan.
Borrowers may have to fork over a huge chunk of change, but there are perks to a jumbo mortgage. For example, jumbo loan rates have reached historic lows, and interest on loans up to $1 million is tax-deductible.
Check with a lender before going house shopping to ascertain your best option(s).