A high-balance loan — also referred to as a conforming high-balance loan or a super-conforming loan — is given to home buyers in high-income areas. It exceeds national conventional loan limits but meets local loan limits. Unlike jumbo loans, high-balance loans are backed by Fannie Mae and Freddie Mac. High-balance loans vary by county, and limits are set by the Federal Housing Finance Agency (FHFA). If you’re looking for a home in a high-income area, you may qualify for a high-balance loan. In this post, we’ll cover everything you need to know about high-balance loans.
How Are High-Balance Loan Limits Calculated?
In most of the U.S., the 2021 maximum conforming loan limit (CLL) for one-unit properties is $548,250. It will increase in 2022 up to a base of $625,000. The maximum conforming loan limit does vary from county to county and may be higher depending on median home value. In counties where 115% of the local median home value exceeds the baseline CLL, the maximum loan limit will be higher than the baseline loan limit.
What Are the Qualifications for a High-Balance Loan?
To qualify for a high-balance loan, applicants must:
- Have a credit score of at least 620
- Be able to make a down payment of 5% of the property’s appraised market value
- Have a debt-to-income (DTI) ratio of lower than 45%
Special Criteria to Qualify for a High-Balance Loan
- Must be applying for a loan in a high-cost area
High-Balance vs. Jumbo Loans: The Differences
A jumbo loan is a non-conforming loan that may be taken out if a home buyer is interested in purchasing an expensive or luxury home or taking out a large mortgage in a highly competitive market. Jumbo loan applicants should be in a high-income earning bracket and have a credit score of 700 or more. Jumbo loan interest rates and down payments are typically higher than conforming loans and requirements are stricter, which may make it more challenging to qualify for.
| Requirement | High-Balance Loan | Jumbo Loan |
| Property type | High-cost counties or areas | Luxury home or property located in highly competitive area |
| Loan Limit | $822,375 (in high-cost areas) | None |
| Minimum down payment | 5% of the property’s appraised market value | At least 10%; some lenders may require up to 30% |
| Minimum credit score | 620 | 700 |
| Mortgage insurance | Required, amount varies based on loan factors | None |
| Debt-to-income ratio | Maximum 45% | Maximum 36% |
| Cash reserves | None but can be conditioned on case by case basis | 6 to 12 months’ worth of monthly payments available |
Is a High-Balance Loan Right for You?
Here are some reasons to choose a high-balance loan:
- If you’re looking in a high-income area
- If you want to qualify for a lower mortgage interest rate
- Your credit score is between 620 and 699
When to Choose a Jumbo Loan over a High-Balance Loan
Jumbo loans typically have more flexibility for loan rates and terms. You may want to choose a jumbo loan if:
- You are not in a high-cost area (and won’t qualify for a high-balance loan)
- You are a high-income earner
- You have extremely good credit
- You are financing a luxury home
- You are financing a home in a highly competitive area
- You have a credit score of 700 or more
FAQs about High Balance Loans
Q: What is a high-balance loan?
A: A conforming high-balance loan exceeds national conforming loan limits but meets local loan limits. These are common in high-income areas where local loan limits exceed the national limit.
Q: Do I qualify for a high-balance loan?
A: There are many factors that contribute to qualifying for a high-balance loan, but generally you will qualify if you are looking in a high-income area and have a credit score of 620 or higher.