You know I like to keep things simple, so in order to explain it in a simple straightforward way, I’m going to break down two different types of mortgage for you. By explaining the basics, You’ll be better equipped to plan your next home purchase and save yourself a ton of hassle. The two mortgages we’re working with here are the Conventional Conforming Loan and the Jumbo Loan. I’ve been working in the industry for a long time and have become respected as a Jumbo loan expert which means I know my way around the conventional mortgage and I know when it’s time to switch it up and can avoid any pitfalls that may be in the way down the road.
Let me break down the Definitions.
Conventional Mortgage: A Conventional (Conforming) fixed-rate mortgage is a loan that literally fits with the status quo and established guidelines for the size of the loan and your financial situation. They may feature lower interest rates than almost any other type of loan and is the typical mortgage product you’ll find yourself in. This is even lower than the established FHA loans or VA loans --- We’ll get into those at a later date.
Jumbo Loan: A jumbo loan is a mortgage used to finance properties that are just too expensive for the conventional conforming loan to cover as determined by the
Federal Housing Finance Agency (FHFA).
You’ll know when it’s time to switch to a Jumbo loan as you identify a property that is well over half a million dollars. The Fannie Mae and Freddie Mac baseline Conforming loan limit in California are now $548,250 for most counties. In some high-cost counties, it's as high as $822,375. Anything higher than that financed is going to be defined as a jumbo loan.
As a Jumbo Loan expert, I can help you navigate your home-buying journey and whether you need to go jumbo or not.
Here’s why the loan limits really matter. If you want to borrow more than what a conventional loan allows, you’ll be in the market for a jumbo loan. At this point your lender is going to ask you for more of everything. We’ll want a higher credit score, a larger down payment, more cash in your reserves, additional fees and steps in the loan process. Oh, and don’t forget, you may even have to get and supply an extra appraisal. (I didn’t say it was more fun, but hang in there).
A conventional mortgage requires around a 680 credit score to qualify for the loan. A jumbo loan is upwards of 720. This means if you’re at a good level now, aim for greatness! I’m not kidding, work on the debt to income ratio and get 40 extra points.
The extra appraisal I was talking about is for the same reason that many people seek a second opinion at the Dr’s office. For a lender to approve a loan, they REALLY want to know what that property is worth. So be prepared for that requirement, it’s not uncommon in today’s fluctuating market.
The great news? In 2021 the rates increased so Jumbo loans in this area aren’t as common as they were as recently as 2019. Conventional mortgages are still where we’d ideally like to be. Either way, you’re in great hands with my team and we’ll do our very best for you no matter what kind of loan you need.
If you are looking to get into these purchases from an investment standpoint there are a ton of ways to handle the loans and to protect yourselves from your assets. I’ll get into Trusts and LLCs at another time. For now, let me get you into your next dream home!
For more information or to get in touch with me and my team link up with me on social, linked below, schedule a call with me today.
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