A jumbo loan is a conventional (not government-insured) mortgage loan. Because jumbo loans do not conform to the loan limits set out by the FHFA, they are not eligible for purchase by government-backed entities such as Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that buy and sell bundled mortgage loans.
Jumbo loans are underwritten to individual investor guidelines, as these larger corporations can write stricter rules to fund these loans above the county’s loan limit. These limits vary by county.
For most counties along the California coast and the San Francisco Bay Area, the 2024 conforming loan limit is $1,149,825. Any loan that exceeds $1,149,825 is considered a jumbo loan. Individual counties such as Solano County and San Joaquin county have lower jumbo loan limits.
For more information about qualifying for a jumbo loan, click here.
What Is The Specific Jumbo Loan Amount And Limit In California?
The specific jumbo loan amount depends on the county where the home is located.
Here we have linked to the conforming loan limits for different counties across California. This link will allow you to look up the specific loan limit for your zip code and county.
Any loan amounts above these county loan limits will be considered jumbo mortgages.
In general, the mortgage qualification criteria are much stricter for jumbo loans simply because of the higher risk associated with the larger loan amount. Borrowers looking for homes that will require larger mortgages should have good credit, stable income, ample reserves, and a manageable level of debt.
How Jumbo Loans Relate To Home Prices
Jumbo loans are mostly used by those purchasing higher-end or “luxury” properties. By design, conforming loan limits are usually set higher than the median home price within a particular county. In theory, this gives homebuyers plenty of properties to choose from without the need for a jumbo loan.
Exceptions
High-population areas that are seeing tremendous growth in the demand for housing will often see high home prices as well.
In Alameda County, where desirable cities like Oakland and Berkeley are located, the median home value was around $1,161,517 as of December 2021, according to Zillow. The conforming loan limit for the county is currently $970,800. The down payment amount will determine whether or not a borrower is eligible for conventional financing or would need to apply for jumbo financing.
There are jumbo products that will allow for a down-payment of as little as 10.01%, but there are many factors to consider when getting a mortgage that can affect your rate and loan.
What Are Jumbo Loan Rates In California?
Jumbo loan interest rates are now sometimes as much as 1-2% lower than conforming (Fannie/Freddie) rates for a multitude of reasons. We’ve listed a few reasons down below, but to learn more, check out this blog for additional information on why jumbo interest rates are so much lower than conforming.
Stricter Qualifications. Jumbo loans are often much “safer” than conforming loans from a risk perspective because jumbo guidelines are often much stricter with respect to credit, reserve requirements (after close), debt ratios, and down payments. For example, one of our best jumbo investors requires 12 months of payments for all properties to be available as reserves after close of escrow. In contrast, conforming loans often require very little or no reserves after close.
G-fees. Also known as guarantee-fees, these are additional fees that Fannie and Freddie tack on to the loans they buy (in exchange for their guarantee) that result in higher rates. Jumbo loans do not have G-fees.
Appraisals. Jumbo lenders tend to be much stricter when it comes to appraisals too, making the loans that much safer. There are no appraisal-waivers in jumbo land, and almost every jumbo lender requires some sort of appraisal review for every transaction.
Mortgage industry guru, Rob Chrisman, reminded us recently that “Freddie Mac 30-year fixed mortgage rates started 2020 at 3.72%, just 40 basis points above its all-time low, and plunged to 2.65% by the start of 2021. Now they’re back up to 3.125% – 3.25%. Freddie’s volume in February was over 75 percent refi…”
With rates up so much now (over 5%), many lenders are panicking and trying to shift to purchase money mortgages in a hurry.
While most of the “easy pickin’” refi’s are long gone, there are still millions of borrowers who can benefit from a refi, particularly if they have PMI or debts to consolidate.
Next Steps?
If you’re thinking about obtaining jumbo financing or have additional questions about what loan products you may qualify for, you can reach our team here, by phone at (855) 855-4491, or by email at jvmteam@jvmlending.com.
Take the next step towards finding your best mortgage.
