California Jumbo and Super Jumbo Loan FAQ
What is a California jumbo loan?
A California jumbo loan is a loan for an amount that exceeds the conventional loan limit. This limit is determined by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines.
What is the conventional loan limit?
The conventional loan limit depends on the median home price in your area. "High cost areas," which includes most of California, have higher conventional loan limits. Until December 31, 2008, conventional loan limits are between $417,000 and $729,750. For a chart of current California conventional loan limits, click here. After December 31, 2008, conventional loan limits in California will be between $417,000 and $625,500.
How do interest rates for California jumbo loans compare to that of conventional loans?
Lenders base interest rates on risk. Therefore, the jumbo interest rate is usually higher than that of a conventional loan because the risks to the lender are higher. For example, if the buyer defaults, a luxury home is hard to sell quickly at its full value. Luxury homes are simply more vulnerable to market highs and lows. Because of this, California jumbo loan interest rates usually run between .25% and .5% higher, and have jumped as high as 1% higher during times of housing turmoil or high investor anxiety. Other factors that determine the interest rate include property types and mortgage amounts.
Do jumbo loans require a down payment?
Yes. In fact, lenders often require a higher than usual down-payment on a California jumbo loan, in order to alleviate the risk they assume by carrying a loan for a high-end or luxury home.
Can you refinance a California jumbo loan?
Yes.
Are jumbo loans only used for 2nd homes or vacation homes?
No. In fact, since most areas in California are high cost areas, many homes in California require a jumbo loan. To make these loans more affordable, some lenders offer a 40 or 50 year repayment option. Others give borrowers the option of making interest only payments, allowing borrowers to purchase homes that would have been otherwise impossible to afford.
Do I have to maintain Private Mortgage Insurance (“PMI”) on a jumbo loan?
Not always. There are ways to avoid paying PMI. PMI is only required for those who borrow more than 80% of the value of their home. As long as the Loan to Value (“LTV”) ratio is under 80%, PMI is optional. Many choose to split the mortgage into two parts, borrowing 80% with a jumbo loan and borrowing the rest with a higher interest 2nd mortgage. This alleviates the need for PMI on the primary/jumbo loan.
UMAX Mortgage offers mortgages in Ventura County, Los Angeles County, and throughout the state of California. Julie Cline is licensed by the CA Department of Real Estate #01743818.
If you have any questions about California jumbo loans, California jumbo conforming loans, or California FHA jumbo loans, feel free to contact Julie Cline at 866-599-8480 or on the web at http://www.umaxmortgagecalifornia.com.
Please note: this article is not intended as tax, financial or legal advice. Please obtain advice about your specific situation before making financial or legal decisions.
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