A Jumbo Loan is a type of mortgage used to finance homes that exceed the conforming loan limits set by Fannie Mae and Freddie Mac. These limits vary by county but generally cap around the mid-$700,000s in most areas and higher in select high-cost markets like Los Angeles, Orange County, and San Francisco. If the loan amount is above that threshold, it’s considered “jumbo.”
Because jumbo loans fall outside the conforming loan guidelines, they are funded by private investors and often have stricter qualification requirements. Borrowers typically need a strong credit profile, higher income stability, and a larger down payment, usually starting around 10%–20%. However, many lenders—including ours—offer flexible jumbo options with competitive rates and terms tailored to meet the needs of high-net-worth individuals or those purchasing premium properties.
Jumbo loans can be structured as fixed-rate or adjustable-rate (ARM) mortgages, and they are available for primary residences, second homes, and investment properties. They are commonly used for financing luxury homes, coastal properties, or real estate in high-value neighborhoods where prices often exceed conforming limits.
For qualified borrowers, a jumbo loan offers the ability to finance more with a single loan—without the need to combine multiple smaller mortgages. It’s an excellent choice for buyers seeking a streamlined solution for high-value real estate purchases while maintaining flexibility and competitive pricing.
Information shown is for general reference and may vary by borrower qualifications and program terms. This is not a commitment to lend. Contact us for full loan details and eligibility requirements.
A jumbo mortgage is a type of home loan that exceeds the limits set by the Federal Housing Finance Agency (FHFA). As of now, the standard loan limit is $510,400 for a single-family home in most areas. However, in high-cost regions like Hawaii, Alaska, and certain federally designated markets, the limit can be as high as $765,600.
Jumbo loans are considered nonconforming mortgages, meaning they don’t meet the guidelines of government-backed entities like Fannie Mae and Freddie Mac. However, they still must comply with the Consumer Financial Protection Bureau’s standards for “qualified mortgages.”
These loans are typically used by high-income earners, with annual earnings ranging from $250,000 to $500,000 or more, looking to purchase homes that exceed the conforming loan limits.
Because jumbo loans are not guaranteed by government agencies, they are considered riskier for lenders, as they do not have protection in case the borrower defaults. This makes jumbo loans subject to stricter approval requirements, such as a higher credit score, a larger down payment, and a lower debt-to-income ratio.
Qualifying for a jumbo mortgage can be more challenging than qualifying for a conventional loan because of the higher loan amounts and more stringent requirements. Lenders set their own underwriting guidelines, so eligibility may vary, but here are some general requirements:
Higher Credit Score:
Most lenders will require a FICO score of at least 700, with some lenders requiring a score of 720 or higher. If your score is below this, you’ll likely need to compensate with a lower debt-to-income ratio (DTI).
Debt-to-Income Ratio (DTI):
Your DTI ratio should be under 43%, and it’s preferable to keep it closer to 36%. This ensures that you are not over-leveraged in your borrowing capacity.
Cash Reserves:
Lenders typically require you to have significant cash reserves. This could range from ten months to a year of mortgage payments in a savings account to ensure that you can afford the loan in case of unexpected financial issues.
Income Documentation:
Manual Underwriting:
Jumbo loans are manually underwritten, meaning a lender will closely scrutinize your credit report, bank statements, and assets. A past bankruptcy or foreclosure can make it more difficult to secure a jumbo loan.
Property Appraisal:
Your California home must meet certain standards before it can be financed with a jumbo loan. The property must be deemed “clean, sanitary, sound, and safe” by an appraiser before you can close the loan.
Special Loan Programs:
Some borrowers in California may qualify for special loan programs, including:
Flexibility in Loan Terms:
California borrowers can choose from fixed-rate or adjustable-rate jumbo mortgages, with a variety of term options. This allows you to select the loan structure that best fits your financial situation and goals.
Wide Property Eligibility:
There are no government restrictions on how you can use your jumbo loan in California. You can purchase a variety of properties, including:
Lower Down Payments:
While conventional mortgages typically require a 20% down payment, jumbo loans often offer down payments as low as 5%, with 10% being a more common figure. This makes jumbo loans more accessible to borrowers with substantial incomes but lower cash reserves.
Competitive Interest Rates:
The average annual percentage rate (APR) for a jumbo mortgage can be on par with conventional mortgages, and in some cases, it may even be lower. This allows you to borrow more while paying similar or lower interest compared to traditional loans.
Larger Loan Amounts:
Jumbo loans allow you to borrow higher amounts compared to conventional mortgages, which can be crucial when purchasing high-value properties. This provides you with more financial flexibility and the ability to buy a higher-quality home or investment property.
Higher Interest Rates:
Jumbo mortgage rates may be slightly higher than those on conforming loans. This could result in higher monthly payments and more interest paid over the life of the loan, especially if you opt for a larger loan amount.
Stricter Qualification Requirements:
Jumbo loans tend to have stricter qualification rules compared to other types of mortgages. These rules often include:
These stricter requirements can make it harder for some borrowers to qualify for a jumbo mortgage.
Jumbo mortgage loan amounts exceed the maximum dollar amount guaranteed by Government-Sponsored Enterprises (GSEs). As of the current limit, loans greater than $510,400 are considered jumbo loans, though this can vary in high-cost areas or luxury markets, where the limit may be as high as $765,600 or more.
Jumbo loans are not limited to a 30-year fixed-rate program. Many borrowers opt for an adjustable-rate mortgage (ARM) because it can offer a lower initial interest rate and lower monthly payments. This can be a good option for those who expect to move or refinance before the adjustable period begins.
Not necessarily. Historically, jumbo loans had higher interest rates than conforming loans, but rates for jumbo loans can fluctuate. In some cases, jumbo rates are now comparable to or even lower than those of conforming loans.
To improve your credit score (FICO score), focus on:
Avoiding frequent credit applications These steps can help boost your credit score over time.
A jumbo loan can be a great option for California homebuyers who are financially strong and need a large loan to purchase a high-priced home. However, it’s important to carefully evaluate your financial situation before committing. Since jumbo loans are larger and lack government backing, they carry more lender risk.
Before applying for a jumbo loan, consider:
Whether you truly need the large loan amount.
If you’re financially prepared for such a large financial commitment.
Whether a smaller conforming loan or a combination of loans (e.g., a smaller loan plus a second mortgage) might be a more financially prudent option.
Information shown is for general reference and may vary by borrower qualifications and program terms. This is not a commitment to lend. Contact us for full loan details and eligibility requirements.
