A jumbo mortgage, as the name implies, is a loan that exceeds the conforming loan limits established by the Federal Housing Finance Agency. For most areas of the country, the current conforming loan limit is $417,000 for a single-family home. For higher priced markets such as San Francisco and Los Angeles, the maximum conforming limit is $625,000. Depending on the county you’re buying in, as well as the property itself, you may need a jumbo mortgage.
Keep in mind that it is the loan size that matters, not the price of the home. Let’s say you’re buying a $500,000 home in Calaveras County, where the conforming loan limit is the standard $417,000. If you put 20% down, the amount of the loan would be $400,000, so you would not need a jumbo mortgage.
On the other hand, if you’re buying a $1,000,000 home in Long Beach (sounds nice), and putting 30% down, your loan amount would be $700,000. Because this is higher than the conforming limit of $625,000 for higher priced markets, you would need a jumbo mortgage.
As you might expect, qualifying for a jumbo mortgage is a bit harder than qualifying for a conforming loan. Lender requirements will vary widely, but typically, you’ll need a credit score of at least 700, a debt-to-income ratio of 43% or less, at least six months’ cash reserve, and at least a 15% down payment.
The good news is that interest rates for fixed-rate, 30-year jumbo mortgages are at all-time low of 3.6%, which saves you money over the life of the loan. If you are considering purchasing a home in California, now may be the time.
If you have questions about the right loan for you, Golden State Mortgage would love to help.