Jumbo Mortgage Loans in California
California jumbo loans are loans that exceed the limits set by the Federal Housing Finance Agency (FHA). They’re also called jumbo mortgages. Jumbo mortgages in California exist to fund luxury properties or homes in very competitive local real estate areas. As such, they have specific underwriting requirements and paperwork involved.
California Jumbo Loans are designed for homebuyers who want to purchase a high-priced home, but what price is above the limit? In most of the country, the maximum loan amount that can be purchased with a conforming loan is $647.200. However, in some areas of the country, including parts of California, the limit is as high as $970,800. Once the house you want to buy costs more – you should consider a Jumbo loan to finance the purchase.
What’s good about Jumbo loans?
If you’re thinking of buying a home in California, and you have already learned more about jumbo loans, you probably might have asked yourself a question – ‘Why should I consider one?’
Well, Jumbo loans come with a number of benefits. Including:
- You can purchase a more expensive home: If you have your heart set on a luxury home or an expensive piece of real estate, a Jumbo loan will allow you to finance the purchase.
- You can avoid Private Mortgage Insurance (PMI): If you take out a conventional mortgage loan, you will be required to pay PMI. However, with a Jumbo loan, you can avoid this added expense.
- You may qualify for a lower interest rate: In some cases, lenders may offer lower interest rates for Jumbo loans compared to conventional loans. This could potentially save you thousands of dollars over the life of the loan.
- You can use gifted funds.
- Jumbo loans offer more flexible underwriting standards, which means that it may be easier to qualify for a jumbo loan than a conventional loan.
- Jumbo loans often come with additional perks, such as points or rate discounts.
- Because jumbo loans aren’t subject to the same regulations as regular mortgages, you may have more flexibility when it comes to things like loan terms and down payments.
What Are The Disadvantages Of California Jumbo Loans?
While jumbo loans can offer more flexible terms and lower interest rates than traditional loans, they also come with some disadvantages.
- Heftier down payment: Low down payments are reasonably common on conforming loans. But not when it is about a jumbo loan. Prepare to pay at least 20% of a down payment (though some lenders may go as low as 10%).
- Potentially higher interest rates: No worries, jumbo loans don’t mean jumbo rates. Of course, they will be slightly higher than those on conforming loans, but it all depends on the lender. Remember that many lenders are ready to offer such rates that can be competitive with conforming loans. So make sure to shop around.
- Higher closing costs and fees: Because there are some extra qualifying steps, you can expect higher costs at the closing table.
- Additionally, jumbo loans are not backed by government agencies like Fannie Mae and Freddie Mac, which means they may be harder to find (but you’re at the right place already)
How To Qualify For A Jumbo Loan?
Since it takes more risk and the loans aren’t backed by government entities, it can cost more effort to qualify for this type of loan. Consider that some lenders will require to see enough funds in the bank to cover six to twelve months of payments.
So, here’s what you need to qualify for a California Jumbo loan:
- Credit score: It’s practically impossible to qualify for a jumbo loan if you have a bad credit score. Credit unions and Banks expect borrowers to have a credit score higher than 700.
- Lenders will require your FICO score to be as high as 720 to qualify for a jumbo loan.
- Debt-to-income ratio: Lenders will surely take a closer look at your debt-to-income ratio to make sure you can afford the mortgage payment and won’t become over-leveraged. Keep in mind that they may be more flexible if you have excessive cash assets. However, some lenders have a hard cap of 45% DTI.
- Cash: Your chances of being approved for a jumbo loan will be higher if you have enough cash in the bank. It is a daily routine for lenders to ask ones, who want to qualify for a jumbo loan to prove that they have enough cash reserves to cover at least one year of payments.
- Appraisals: There is a chance that some lenders could require a second home appraisal for the property you are buying.
- More money, more documents?
To verify your financial well-being, you will need to prepare extensive documentation for a jumbo mortgage loan, such as :
– full tax returns
– W-2s and 1099s
– bank statements
– investment account information
- Since the Great Recession and the real estate housing bubble of 2008, requirements for a jumbo loan have become more rigorous. However, with the right mortgage loan company on your side, the process is still just as easy.
Should I Go For a 15- or 30- Years Jumbo Loan?
If you’re in the market for a jumbo loan, you may be wondering whether a 15-year or 30-year loan is right for you. Here’s a quick rundown of the key differences:
With a 15-year loan, you’ll generally get a lower interest rate than with a 30-year loan. However, your monthly payments will be higher since you’ll be paying off the loan in a shorter period of time.
Another key difference is that with a 15-year loan, you’ll typically have to make a larger down payment than with a 30-year loan. This is because lenders view 15-year loans as being riskier since there’s less time to recoup their investment if you default on the loan.
Finally, it’s important to note that with a 15-year loan, you’ll build equity in your home more quickly than with a 30-year loan. This can be beneficial if you eventually decide to sell your home or take out a home equity loan.
Ultimately, the decision between a 15-year and 30-year jumbo loan comes down to your personal financial situation and goals. If you can afford higher monthly payments and want to save on interest costs, a 15-year loan may be right for you. If you need lower monthly payments and are willing to pay more in interest over time, a 30-year loan may be right for you.
How Can I Get The Best Deal On A California Jumbo Loan?
If you’re in the market for a jumbo loan, there are a few things you can do to ensure you get the best deal possible. First, it’s important to shop around and compare rates from multiple lenders. It’s also a good idea to have a strong credit score, as well as a low debt-to-income ratio and a large down payment. You may also be able to get a better deal by opting for an adjustable-rate jumbo loan. Borrowers who meet these criteria will be in a good position to negotiate a lower interest rate.
By understanding the ins and outs of jumbo loans, you can make sure you get the best deal possible on financing for your dream home.
Working with a Company that Specializes in Jumbo Loans
Here at LBC Mortgage, we understand the unique needs of borrowers who are looking to take out jumbo loans to buy the home or property of their dreams. We also understand that jumbo loans come with their own unique set of circumstances and regulations.
Fortunately, as the California jumbo loan specialists, we’re prepared to work with you to help you get the best possible deal. Our network of established, reputable and reliable lenders have worked with many high earners and are experienced in accommodating your needs as well as understanding your goals for your new home or property.
Apply For A California Jumbo Loan Today!
We’ll take the time to answer any questions you may have, as well as look into other loan options beyond jumbo loans to help get you the maximum savings possible. There are a variety of home loans out there, some of which are guaranteed by Fannie Mae and Freddie Mac, and others, like jumbo loans, which are not. It’s important to weigh the pros and cons of the different types of mortgage loans to help you figure out which one works best in your favor while helping you reach your goals.
And that’s exactly what we’re here for! Contact us today and let our responsible, friendly California jumbo loan experts help demystify the whole jumbo mortgage process for you. We’ll work hard to earn your business, comparing deals, long-term costs, tax liabilities and more so that you can save both time and money while enjoying all of the beauty and splendor that your new luxury home has to offer.
Frequently Asked Questions
A jumbo loan is a mortgage that exceeds the conforming loan limits set by the Federal Housing Finance Agency. In most of the country, the maximum loan amount that can be purchased with a conforming loan is $647,200. However, in some areas of the country, including parts of California, the limit is as high as $970,800.
To qualify for a jumbo loan, you’ll need a good credit score and a healthy debt-to-income ratio. You’ll also need to prove that you have the financial resources to make a large down payment and cover the monthly payments.
Interest rates on jumbo loans are usually slightly higher than for conforming loans. However, since each lender sets its own rates, it’s important to compare offers from multiple lenders to get the best rate possible.
The minimum credit score for a jumbo loan in California is 680. However, most lenders will require a credit score of 700 or higher.