Everything You Need to Know About Colorado Jumbo Loan Limits

Buying a home in Colorado can be tricky when it comes to securing financing especially if you’re looking at pricier properties that require jumbo loans. Jumbo loans exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA) each year, allowing borrowers to finance more expensive homes. However jumbo loans come with stricter eligibility requirements and higher interest rates compared to conforming loans.

In this comprehensive guide, we’ll walk through everything you need to know about Colorado jumbo loan limits for 2023-2024 so you can make informed decisions when applying for a mortgage.

What Are Jumbo Loans?

Jumbo loans are mortgages that exceed the conforming loan limits established by the FHFA for Freddie Mac and Fannie Mae. The baseline conforming loan limit for most US counties in 2023 is $726,200 and $766,550 in 2024. The FHFA adjusts this limit annually based on changes in home prices.

Properties located in more expensive real estate markets like Colorado have higher conforming loan limits. For a single-family home in Denver, Douglas, and several other counties, the limit is $806,000 in 2023 and $816,500 in 2024.

Any mortgage over these thresholds is considered a jumbo loan. Jumbos allow buyers to finance pricier homes but come with stricter eligibility standards, higher down payments, and higher interest rates.

Colorado Jumbo Loan Limits by County

The jumbo loan limit in Colorado depends on which county you’re purchasing property in. Here are the 2023 and 2024 conforming loan limits for the counties with the highest values:

• Denver County: $806,000 (2023), $816,500 (2024)
• Douglas County: $806,000 (2023), $816,500 (2024)
• Boulder County: $826,500 (2023), $856,750 (2024)
• Broomfield County: $806,000 (2023), $816,500 (2024)
• Clear Creek County: $806,000 (2023), $816,500 (2024)

For other Colorado counties like Alamosa, Chaffee, Delta, and Moffat, the conforming limit is $726,200 in 2023 and $766,550 in 2024.

Any mortgage over these thresholds is considered a jumbo loan. So if you wanted to buy a $900,000 home in Denver, you’d need a jumbo mortgage.

Factors That Impact Jumbo Loan Eligibility

Jumbo loans have stricter eligibility requirements than conforming loans. Here are some key factors lenders consider:

• Credit score Most jumbo lenders want scores of 700 or higher. The median down payment is 30% for borrowers with scores below 760.

• Down payment: You’ll need at least 10-20% down for a jumbo loan. The median down payment is 26% for jumbos.

• Debt-to-income ratio: Your DTI should be below 43%. Jumbo lenders are more conservative when assessing your ability to repay the loan.

• Cash reserves: Expect to show 12-24 months of mortgage payments in reserves. Lenders want to see you have enough assets to repay the loan.

• Loan amount: In high-cost areas like Denver or Boulder, jumbos up to $2 million are common. Above $2 million, eligibility gets much stricter.

Meeting these requirements demonstrates you have the financial resources to manage a large mortgage payment. Failing to meet one doesn’t automatically disqualify you but makes approval more challenging.

Jumbo Loan Interest Rates

The main tradeoff with jumbo loans is that you’ll pay a higher interest rate. Based on 2023 averages, you can expect rates around:

• Conforming 30-year fixed: 6.5%
• Jumbo 30-year fixed: 6.625%

That extra 0.125% may seem small but costs you an additional $48/month on a $900,000 loan. Over the full 30-year term, you’ll pay $17,280 more in interest.

Rates on conforming and jumbo loans have decreased in 2023 as the Federal Reserve has increased the federal funds rate. But expect to always pay a premium on jumbos given the higher risk and loan amount for lenders.

ARM programs like 5/1 or 7/1 jumbo ARMs offer lower initial rates but eventually become variable exposing you to interest rate risk. Often a fixed-rate jumbo is the safer choice for most buyers.

Tips for Securing a Jumbo Loan

While jumbos are more challenging to qualify for, here are some tips that can help your chances:

• Shop with both retail lenders and mortgage brokers – brokers have access to wholesale jumbo programs you won’t find directly with lenders.

• Explore portfolio lending programs – smaller banks offer jumbos they hold on their books allowing more flexibility.

• Ask about exceptions on reserves or property types – some banks may waive reserve requirements for certain borrowers.

• Get pre-approved early – gives you time to fix any credit issues and show sellers you can close.

• Lower your DTI – pay down debts and reduce monthly obligations to offset the larger mortgage payment.

• Make a larger down payment – funds above 20% down improve your eligibility and rates.

With the right preparation and research, you can still qualify for a jumbo loan in Colorado’s competitive housing market. These specialized mortgages allow you to purchase more expensive properties that conforming loans can’t finance.

The Bottom Line

The jumbo loan limits in Colorado vary by county based on local home values but run between $766,550 to $856,750 for a single-family home. Jumbos have stricter approval criteria that requires higher credit, down payments, and reserves compared to conforming mortgages. But they allow buyers to purchase high-end real estate that standard loans can’t finance.

Understanding the jumbo loan limits in your target county makes it easier to set expectations when applying for a mortgage. If you need financing above the conforming limits be prepared to meet tougher standards. But with the right preparation and financial profile, a jumbo loan can help you turn your dream home into a reality.