You can easily apply for different loans in California, such as home loans, equity loans, and many others. Another loan you can consider if you’re considering a big purchase is a jumbo loan. Many people need a jumbo loan because they want to make a purchase that is not covered by traditional loans.
What Is a Jumbo Loan?
If you’re considering obtaining a property that costs more than the standard $647,200 limit for a conventional loan set by the Federal Housing Finance Agency (FHFA), you will need to apply for a jumbo loan. These loans are more extensive than traditional loans and come with stricter lending requirements, making them a little more challenging to obtain.
Lenders typically require a higher credit score and income for a jumbo loan than a conventional loan. They may also need a substantial down payment, typically 20% or more. You’ll likely face higher interest rates and stricter repayment terms with a jumbo loan. This is because jumbo loans are considered a higher risk by lenders.
What Are the Exceptions?
There are certain exceptions when applying for jumbo loans. For example, you can find jumbo loans backed by the government. This is the case with Fannie Mae and Freddie Mac loans. These loans are also called conforming loans because the government backing helps reduce the risks for lenders. This means you can get a jumbo loan without meeting all the rigorous requirements.
The Jumbo Loan Rates in California
The rates of jumbo loans in California differ depending on the lender, the type of loan you want, the amount of the loan, your credit score, and the type of collateral you put up. For various reasons, they can occasionally be up to 1% to 2% less expensive than conforming (Fannie/Freddie) rates.
First, California has stricter qualifications for you to obtain jumbo loans. For instance, you must have:
- A credit score of 720 or above
- A debt-to-income ratio should be lower than 43%
- A minimum of 20% equity in the property or a 20% down payment
- A minimum of six months of funds in the bank after closing the loan
Lenders will also look at the following factors when approving your loan.
- Your employment history
- Your income
- Your debts
- Your assets
- Your credit history
Second, the type of loan you want matters. For instance, with a fixed-rate mortgage, your interest rate will remain the same for the ‘life of the loan.’ The same case applies to your monthly fees. However, this type of loan has higher interest rates than adjustable-rate mortgages.
If you want an adjustable-rate mortgage, you can get a lower interest rate for the first few years of the loan. After that, the interest rate on your loan will adjust based on changes in the market. This can be more unpredictable, as it could be higher or lower than the initial rate.
Your Jumbo Loan Experts at Express Capital
If you purchase a home above the conventional loan limit, you must apply for a jumbo loan. Jumbo loans typically have stricter eligibility requirements than traditional loans, but they can offer more favorable terms and rates. Express Capital works with first-time home buyers in exploring the perfect loan option for the home of their dreams. Get in touch with us today at (949) 751-6940 for your jumbo loan needs!