What is a Jumbo Loan in California

Jumbo loans in California

A jumbo loan in California is a loan amount that is over the conforming county loan limits established by the Federal Housing Finance Agency. It is a conventional mortgage loan, which means it is not government-backed. Due to the fact that jumbo loans do not follow the loan limits determined by the FHFA, they can’t be purchased by Freddie Mac or Fannie Mae, the government sponsored enterprises that purchase and sell mortgage loans.

California jumbo loan underwriting

California jumbo loans are underwritten to individual investor guidelines, since these companies can write stricter rules to fun these large loans above county loan limits. Those loan limits vary from county to county. For most California county’s the 2022 conforming loan limit is $970,800. A loan that exceeds that amount is considered a California jumbo loan. Your county may have lower limits.

California jumbo loans and home prices

The real estate market in California is very competitive, especially in desirable neighborhoods. This year, the average medium home price in Orange County is $1,265,000, $930,000 in Ventura County, and $860,230 in Los Angeles County, and those are just the medium prices. This makes jumbo loans more common in California.

Your down payment will determine whether you are eligible for conventional financing or require a jumbo loan for higher-priced homes.

Jumbo loan rates in California

Jumbo loan interest rates can be up to 1 to 2% lower than conforming mortgage rates. There are many reasons why you can save on interest with a jumbo mortgage loan including:

Require appraisals: Jumbo loan lenders are stricter when conducting appraisals. This makes jumbo loans less risky for lenders. Typically, the less risk, the lower the interest rate. When getting a jumbo loan, you can’t waive your appraisal.

No guarantee-fees: Also known as G-fees, these are fees that both Fannie Mae and Freddie Mac charge for their guarantee. Jumbo loans do not have these fees tacked on.

Higher qualifications: Jumbo loans are less risky because they have stricter guidelines regarding credit, reserves, debt ratios, and down payments. This makes jumbo loans more challenging to qualify for, but less expensive.

Jumbo loan refinance rates

Refinancing is tricky these days, with many people securing historically low interest rates during 2020 – 2021. However, there are still opportunities for certain borrowers to save.

Are you considering a California jumbo loan?

Let us help you purchase the home of your dreams. We help connect borrowers with jumbo loans across the U.S. and in California. Secure the best rate. Contact us today.