A “Jumbo Loan” refers to loans with amounts higher than the “Conforming” loan limits. The Conforming loan limits are what Fannie Mae and Freddie Mac use for determining their maximum loan amounts. In Orange County the maximum Conforming loan limit is $679,650, so any loan amount higher than $679,650 is a Jumbo. When the loan amount starts getting into the $1,000,000 and higher range some lenders will refer to them as “Super Jumbo”. Jumbo loans tend to have similar guidelines to normal Conventional guidelines, but there can also be differences that may offer more flexibility to the borrower. Many lenders offer Jumbo loan programs. Some Jumbo programs are offered through “Portfolio” lenders, or lenders who plan to keep the loan in their portfolio rather than selling the loan on the secondary market (like with Conventional loans.). Portfolio loan program tend to have slightly higher interest rates to go along with the added flexibility in underwriting. In most cases a Jumbo loan program will require fairly good credit, with FICO scores above 720, although there are portfolio lenders who will allow for lower FICO scores. There is some give and take. It can just depend on how solid the loan package is, including how much down payment the borrower will have.
VA Jumbo Loan
I always like to point out that one of the best Jumbo programs is VA. Of course, to qualify for a VA loan you must be a Veteran. Still, it is possible to get a VA loan as high as $1,500,000 in Orange County. Plus VA allows for 100% financing up to a loan amount of $687,500. No other program does this.
Types of Jumbo Loan Programs
- “Piggy Back” – allowing for less than 20% down depending on the purchase price.
- Foreign National – A foreign national looking to buy a property in California can get financing. They will most likely need approximately 40% down payment, but there are programs available.
- Asset Depletion – This is a type of underwriting which can help someone who has lots of assets in the bank but not much income on their tax returns. A formula is used in order to extrapolate an income figure from the borrowers assets that can be used for qualifying for a mortgage.
- Pledged Asset – This is a type of underwriting that allows the borrower to “pledge” their assets toward the loan without having to actually sell the asset. This can help someone with assets in the bank and investment accounts that they don’t want to deplete just to buy a home.
- Bank Statements – This type of loan is for Self Employed borrowers. Many times, Self Employed borrowers will have difficulty in qualifying for a traditional home loan. But if they can show cashflow and consistent deposits on their personal or business bank statements then they can still qualify for a home loan. These programs tend to be 5 or 7 year ARM’s but do offer interest only options.