In the recent months we have seen an increase in the demand for jumbo loans. A jumbo loan is not a conventional loan that will be sold to the government sponsored entities, Fannie Mae and Freddie Mac. Conventional loans have easier guidelines/rules and loan sizes are set each year by the government. A conventional loan size across
the nation is $424,100 currently. However, government sponsored entities have another loan product know as a high balance (HB) conventional loan, which is not to be confused with a jumbo loan. Each county limit is set by the government and can be found at https://www.fanniemae.com/singlefamily/loan-limits. To give you
an idea, In Nevada County the high balance loan amount is $477,250, Placer County is $488,750 and most counties in the San Francisco bay area have high balance limits set at $636,100.
A Jumbo loan will exceed those HB loan limits or conforming loan limits. Those loans will not be sold to government sponsored entities but to private investors, most commonly REITs or Wall Street investment banks. For this reason the lender requires much higher qualification requirements and much stricter documentation. Lenders do not want any chance of a borrower defaulting, so the final investors set the rules/guidelines strictly to lend money for those products.
To start almost all lenders require:
1) Great credit over 740, no blemishes on credit and sufficient trade lines (lines
2) Typically a 20-25% down payment
3) Income to debt ratios below 43%
4) Money in savings for reserves.
The lenders go over all documentation with a fine tooth comb and ask a lot of questions. Thus, if your loan officer does not vet your loan qualifications and dig through the guidelines upfront, the loan can be very difficult to close and will likely require extensions. If the borrower does not provide exactly what is asked for, the lender will certainly deny the loan. A good loan team can make all the difference in getting jumbo loans closed in a timely manner. If you have questions regarding jumbo loans, or if we can help you succeed in getting a jumbo loan closed, please feel free to contact us.