What is a California Jumbo Loan?
The median value of a home in California is more than double the median values of homes for the United States as a whole, even though the median income is only slightly higher in California. A need for a jumbo loan depends on the amount you need to borrow; a jumbo loan in California is a mortgage that exceeds the Federal conforming loan limits.
Government’s Role: Fannie Mae and Freddie Mac are the nicknames bestowed upon two government-sponsored entities. The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. These corporations have an active role in providing financial security to mortgage lenders and banks by purchasing certain mortgage loans from them. The limits for loans that Fannie or Freddie will handle have played a role in creating the concept of “jumbo loans.”
The Federal Housing Finance Agency “FHFA”, which oversees Freddie Mac and Fannie Mae, increased the loan limits for one-unit properties to $548,250 for most counties across the United States, up from $510,400 in 2020. There are loan limit adjustments beyond the Federal loan limit baseline based on the county you live in. For example, the conforming loan limit in LA county is $822,375 for a 1-unit property. Borrowers who need to finance houses above the loan limit for their area will need to apply for a jumbo loan, which generally has tighter loan approval guidelines and requires a larger down payment. The limits are set according to home price increases. The FHFA’s House Price Index showed that home prices increased an average of 7.42 percent between the third quarters of 2019 and 2020. That means the baseline conforming loan limit will increase by that same amount.
The median home price in California as of September of 2020 starts at $712,430. As you can see from the conforming loan limits above, jumbo loans aren’t just for financing luxury homes.
California Jumbo Loan Requirements: Loan requirements vary depending upon the lender and current market conditions. Here are some typical property and borrower requirements:
- A 20% down payment typically gets the best interest rate.*
- 10% down (90% LTV) is still possible. *
- Minimum FICO scores start from 680-740.*
- Fixed-rate or adjustable-rate mortgages available.*
- Acceptable debt to income ratios (DTI) are between 38-50%.*
- Property can be owner-occupied.*
- Secondary homes are ok.*
- Investment properties ok.*
- Mortgage insurance is required on loan to values (LTVs) above 85% to 90%.*
We hope that you find this information helpful stay tuned for our next blog.
* © 2021 Premier Mortgage Resources, LLC | NMLS #1169. Equal Housing Lender. Not an offer to extend credit or commit to lend. All information contained herein is for informational purposes only and, while every effort has been made to ensure accuracy, no guarantee is expressed or implied. Any programs shown do not demonstrate all options or pricing structures. Rates, terms, programs, and underwriting policies are subject to change without notice. The material presented in this publication is for information purposes only and not intended to advertise or solicit real estate business.
This is not an offer to extend credit or a commitment to lend. All loans are subject to underwriting approval. Some products may not be available in all states and restrictions apply. PMR is licensed in AZ, CA, CO, HI, ID, KS, MN, MT, MO, NV, OR, UT, WA, and WY. California Licensed by the Department of Financial Protection and Innovation, under the California Residential Mortgage Lending Act.