Buying a high-cost home in California? Well, that price tag probably doesn’t fit inside a conventional loan. That’s where a jumbo loan in California comes in. If you’re looking at homes in areas like Los Angeles, San Francisco, or San Diego, you already know—real estate isn’t cheap. And when your loan amount goes over the conforming loan limit, you need to qualify for a jumbo loan. But here’s the catch—lenders aren’t just handing these out like candy. They expect excellent credit, solid income, and a hefty down payment.
What Is a Jumbo Loan?
A jumbo loan in California is simply a mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac. For 2024, that limit is $766,550 in most areas, but it can go up to $1,149,825 in high-cost counties.
Anything above this amount? That’s jumbo territory. And because these loans can’t be backed by Fannie or Freddie, banks take on more risk—meaning they have stricter requirements.
How to Qualify for a Jumbo Loan in California
If you think getting a conventional loan is tough, buckle up. Jumbo loans demand more from borrowers. Here’s what lenders expect:
- Credit Score: Most lenders want at least a 700+ score. Some may ask for 720 or even 740, depending on your loan amount.
- Down Payment: Expect to put down 10-20%. Some lenders go lower, but that usually comes with higher rates.
- Debt-to-Income Ratio (DTI): Generally, a DTI below 43% is best. Some lenders want it even lower.
- Cash Reserves: Many lenders require 6-12 months of mortgage payments in liquid assets.
- Income Documentation: Tax returns, W-2s, bank statements—be ready to prove your income.
Think of it this way: Banks need to be extra sure you can handle a loan this size, so they dig deeper into your finances.
Interest Rates and Terms for Jumbo Loans
Historically, jumbo loan rates were higher than conventional ones. But thanks to competition, they’re often pretty close.
Expect rates to be around 0.25% to 0.50% higher than regular mortgage rates. But if your credit and income are rock solid, you might snag a competitive rate.
Fixed vs. Adjustable-Rate Mortgages (ARM)
- Fixed-rate jumbo loans: Your rate stays the same. Great if you plan to stay long-term.
- ARM jumbo loans: Starts with a lower rate, but it adjusts later. Ideal if you plan to sell or refinance.
Want to see how today’s rates compare? Check out this guide on how to get the best mortgage rate.
Where to Get a Jumbo Loan in California
Not all banks offer jumbo loans, but you’ve got options:
- Big Banks: Wells Fargo, Chase, and Bank of America have jumbo programs.
- Mortgage Brokers: They shop around for the best rate and terms.
- Credit Unions: Sometimes offer competitive rates.
- Online Lenders: Companies like Rocket Mortgage and LoanDepot have streamlined jumbo loan processes.
Each lender has different guidelines, so it’s smart to compare rates.
FAQs
Do jumbo loans require mortgage insurance?
Most lenders don’t require private mortgage insurance (PMI) if you put at least 20% down.
Can you get a jumbo loan with a low credit score?
Not really. Most lenders want 700+. Anything lower makes it much harder to qualify.
Are jumbo loans only for million-dollar homes?
Nope. In high-cost areas, even modest homes need jumbo loans. A $900,000 home in Los Angeles? That’s jumbo.
Do I need a bigger down payment for jumbo loans?
Usually, yes. Many lenders ask for 20%, but some allow 10% with stricter conditions.
Can I use a jumbo loan for an investment property?
Yes, but rules vary. Some lenders require larger down payments on investment properties.
Conclusion
Qualifying for a jumbo loan in California takes a bit more effort, but if you meet the requirements, you’ll be in a great position to buy your dream home.