The jumbo mortgage financing options in California are typically a bit more restrictive when compared to standard conforming loans. Conventional conforming loan limits today are at $424,100 in most markets and $636,150 in areas that are in so-called “high cost” areas in CA. Yet while there may not be as many jumbo loans issued compared to non-jumbo loans they’re still readily available. Interest rates for jumbo loans can be slightly higher compared to those for conforming loan amounts but really the spread is relatively small. However, recent changes in jumbo guidelines now allow qualified borrowers to still put down as little as 5.0% for jumbo mortgage loan amounts up to $1,500,000. This is especially nice for homebuyers purchasing in more expensive locations like LA, Orange County, San Francisco, San Diego, etc.
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These guidelines have been adjusted to reflect rising home values across the country so the adjustment simply followed what conforming loans did at the first of this year. The conforming loan limit was adjusted upward for the first time in nearly a decade. Prior to the increase which took effect January 1, 2017, the loan limit stood still at $417,000. Conforming loan limits are reviewed in the third quarter of each year and adjusted upward if the national average home price has risen. If the values do not rise or if they fall, the maximum limit stays the same. Likewise, jumbo loan limits have risen as well.
To qualify for the 5.0% down loan up to $1,500,000, the borrowers must use the property being financed as their primary residence. Vacation, second homes or rental properties cannot be financed under the same guidelines and require at least 10% down payment. The minimum credit score for this loan is 700. There will be three credit scores pulled, one from each credit agency. These three agencies are Equifax, Experian, and TransUnion and report the score based upon information in its individual database. Of the three scores, the middle score is used for qualifying purposes. If there is more than one borrower on the application the lowest middle score is the one applied to the loan application.
For those that do want to make a larger down payment such as 10% or 20% the guidelines are relaxed a bit as it relates to credit scores and loan amount limits. Approved homebuyers that have 10% down can finance up to 2.5mil.
When determining how much to put down on a jumbo loan remember that a down payment on a home is relatively non-liquid. There are home equity loans available to tap into homeowner equity but with a 5.0% down payment there really isn’t all that much available. The down payment can’t be easily accessed so some jumbo borrowers elect to put as little down as possible and keep their investment funds active in various deposit and investment accounts. Now, with the higher loan limits available to $1,500,000 with a 5.0% down payment, buyers don’t have to tie up their available funds in a down payment should they wish not to.
You can also select from different loan terms such as 15 or 30 years and choose a fixed or a variable rate program. Variable rate programs are available in the hybrid variety. A hybrid is fixed for an initial period before changing into an adjustable rate mortgage. Remember that the longer or shorter the loan term the different the monthly payment will be even with the same exact interest rate. Simultaneously putting more or less down affects the amount borrowed which will also affect the monthly payment.
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