The housing market in California is overall strong in 2021. The median home price recently increased by 0.5 to set another new record high to $818,260. The new median sales price of existing single-family homes is 39.1 percent higher than the $588,000 recorded last year when the CA real estate market essentially stopped during the start of the pandemic.
Many of these higher-priced homes require Jumbo financing. Jumbo loans are defined as mortgages that exceed the standard conforming loan limits. The 2022 conforming loan limits are currently set to $647,200 in most locations in California, except for some higher-cost locations like San Fransico and Los Angeles where the limits can go up to $970,800 for a single (1) unit property. Muti-unit homes like a duplex, triplex, etc are even higher.
Jumbo loans typically require a larger down payment than conventional loans as they pose more risk to the lenders and banks that originate them.
Lenders often have tighter requirements on jumbo loans because of the incurred risk of lending out more money on a single property and borrower. Additionally, Jumbo loans are typically harder for lenders to resell on the secondary markets making them less attractive for many mortgage lenders.
While buyers can likely find mortgage lenders to offer a conventional mortgage with less than 20% down payment, jumbo loans with less than 20% down are harder to find. However, that’s all starting to change thanks to recent guideline changes in the jumbo markets.
A select few mortgage companies are now offering jumbo financing up to 95 percent loan to value – only 5% down payment. This low down payment option is especially good for buyers in higher costs, traditionally more expensive locations like San Francisco, Los Angeles, San Diego, San Jose, Sacramento, etc
California Jumbo loan requirements:
- The 95% Jumbo financing option only applies to owner-occupied single-family homes, townhomes and condos. Second homes are also permitted with a 5% down payment. Vacant land and lot loans are not permitted. Building on your own site is permitted through special Jumbo construction loans.
- Applicants must be able to document all income and assets necessary for loan approval. Pay stubs, tax returns, etc
- Standard debt to income limits similar to conventional loans apply. The limit for total expense + housing is generally 45%
- A credit score of 680 or better is required to be approved for the 5% down jumbo option. Homebuyers with lower credit scores down to 660 have options with a greater down payment
- Must be a U.S citizen
- Homebuyers must occupy the home within 30 days of the closing
- Buyers will need reserves for most programs. This is the amount of savings retained after the down payment and closing costs are made. Reserve standards can be satisfied by retirement/investment accounts – see below
Jumbo Loan Amount Limits:
New Update 2022: Due to mortgage frequent guideline changes over the last year, some of the loan amount caps listed below may be temporarily reduced.
- 95% Jumbo – loan limit cap $1,500,000 – 3-6 months payment reserves required
- 90% Jumbo – loan limit cap $2,500,000 – 6-9 months payment reserves required
- 85% Jumbo – loan limit cap $3,000,000 – 12+ months payment reserves required
Jumbo Loan Benefits:
- No private mortgage insurance PMI options – single loan and combo piggyback loan options
- 30-year fix rate, 15 year or common adjustable-rate (ARM) options
- No early payoff penalty
- Flexible jumbo refinance options available for both interest rate reductions and cash-out refi.
Serving home buyers nationally including CA: Los Angeles, Orange County, San Diego, San Jose, San Francisco, Fresno, Sacramento, Oakland, Bakersfield, Anaheim, Riverside, Stockton, Irvine, Fremont
Homebuyers that have questions or want to apply (7 days a week) can learn more by visiting Jumbo Mortgage Source here