WHAT IS A JUMBO LOAN?
A jumbo loan is a mortgage that exceeds the conforming high-balance loan limits which are set by two government sponsored entities - Fannie Mae and Freddie Mac.
These two government entities are the nicknames of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. These entities purchase mortgage loans from mortgage lenders and banks and provide financial security to them.
The concept of a “jumbo” loan was created after loan limits were set by Fannie and Freddie.
What are government loan limits?
The government sponsored entities - Fannie Mae and Freddie Mac, purchase loans from banks and other lenders that are deemed as 'conforming'. Though the most important part is the actual loan amount, there are certain requirements and steps that have to be met by a mortgage loan to comply with rules.
At the time of publication, jumbo loans are mortgage loans that are greater than the conforming loan limits set at $417,000 for a single-family residence. Loan limits can go as high as $801,950 for a four-unit property. Mortgage loans that are greater than $1 million are considered "super jumbo loans."
Why is California so special?
Single-family homes in California are more expensive than comparable homes in other states. The median value of a home in California is greater more than double the median value of homes in other cities in the United States. Due to higher cost of average homes, certain counties of California have higher jumbo loan limits.
So mortgages that conform to loan limits are secured by government-sponsored entities but these higher loans that are typical in California – these jumbo loans and super jumbo loans – are not secured by the government.
In many areas of California, higher standards of living, which are typically the result of great paying jobs, result in more expensive homes. Fannie and Freddie have certain exceptions for specific counties in the country, including many located in California, after recognizing the higher living standards in those counties. In California, in counties such as Los Angeles, Orange, San Francisco, and Santa Barbara, loans above the limit of $625,500 are considered as jumbo mortgage loans. Other locations, such as San Diego and Ventura counties, have loans limits ranging between $500,000 and $600,000. Riverside and San Bernardino counties have the standard government-set limit of $417,000.
How to qualify for a California jumbo mortgage loan
It’s not as easy to get a jumbo loan approved because it involves a higher risk for lenders. So it’s important that you have a caring mortgage broker to guide you through the steps. Lenders will examine your details very strictly against the approval criteria. You need to have a good and verifiable income source to ensure repayment the loan amount. The interest rates and down payments amounts are higher as compared to conforming loan amounts. To qualify for jumbo loans:
- You need to make at least 20% of the purchase price as a down payment.
- Your monthly mortgage payment should not be more than 38% of your income without taxes as the lenders look at your debt-to-income ratio as well as the quality value of the property during the underwriting phase.
Using a California jumbo mortgage loan calculator
You can click here to use EZOM’s loan calculator to provide you with a custom look at your potential payment amount based on several pieces of information. It is best to contact us for a proper quote from one of our knowledgeable mortgage loan officers because the calculator does not get the whole picture of your situation.
The calculator will assume that you a credit rating of “excellent” – or a FICO score of at least 740 - and that the property you are buying will be your primary residence. A jumbo loan calculator also implies standard down payment amounts, lender fees, and mortgage insurance, etc.
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Why choose EZ Online Mortgage for your jumbo loan needs?
Most lenders generally offer variable rates. There are rare fixed-rate lenders and one of them is EZOM that offer to lock in low fixed rates.
There are many reasons for choosing EZOM, but the main reason is the low fixed rates. Though the rate is slightly higher than the conventional conforming loan, you get fixed low rates for 15 or 30 years. With this type of California jumbo mortgage loan you get a chance to manage your cash-flow and without worrying about any changes in payments.
Due to low fixed rates, you get an upfront idea about the monthly amount you have to pay for the home. After having an ideaOnce you know this amount, you can get yourself preapproved and take a glance at houses that are in your price range. Now your main focus will be pursuing a home. How exciting!
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After getting pre-approved, you can show the preapproval letter to real estate agents, land specialists, and sellers as evidence that you're going to act quickly when you find your dream property. There are a few agents who may legally bind the purchaser to submit a preapproval letter with their offer.
Having a preapproval letter makes your offer on a house much more legitimate as compared to an offer without preapproval. Hence, a preapproval letter plays a vital role in the market.
Why should you get pre-approved with EZ Online Mortgage?
EZ Online Mortgage offers quick pre-approvals. You will get an online pre-approval letter in minutes if you get qualify. You will be able to print and take that letter with you as your search for homes.
How long does it take to get pre-approved with EZ Online Mortgage?
You can get your pre-approval letter in minutes, which can be shared and printed.