Depending on the loan amount you need and where you’re buying a home in California, you may have difficulty finding financing beyond the conforming loan limits. If this is the case, you may need a jumbo loan.
What is a jumbo loan?
What exactly is a jumbo loan in California? Well, a jumbo loan is a specialized type of mortgage that comes into play when you’re seeking financing for a home that surpasses the conforming loan limits (CLL) established by the Federal Housing Finance Agency (FHFA). Typically, this type of loan is necessary for upscale, luxurious properties or those situated in pricey housing markets like Los Angeles.
If you find yourself in a situation where the home you wish to purchase requires borrowing beyond the CLL, then you’ll need to pursue a jumbo loan. It’s crucial for potential homebuyers, whether a first-time homebuyer or not, to have a clear understanding of the requirements associated with obtaining a jumbo loan in California. For instance, qualifying for a jumbo loan typically demands a higher credit score and a larger down payment.
What is the jumbo loan limit in California?
In 2023, the conforming loan limit for a single-family home in most markets is $726,200. However, these limits can vary depending on where you’re buying a home in California.
- $726,200 is the conforming loan limit in most California counties
- $1,089,300 is the maximum limit in California’s more expensive counties
As a reminder, the loan amount is what determines whether or not you’ll need a jumbo loan, not the home price. So, if you were to put $50,000 down on a $750,000 home in Fresno County, the mortgage would be $700,000, which is under the CLL for this area. In this case, your loan wouldn’t be considered a jumbo loan.
The following counties in California have a conforming loan limit beyond $726,200 for 2023:
|
County |
FHFA Conforming Loan Limit |
| Alameda County | $1,089,300 |
| Contra Costa County | $1,089,300 |
| El Dorado County | $763,600 |
| Los Angeles County | $1,089,300 |
| Marin County | $1,089,300 |
| Monterey County | $915,400 |
| Napa County | $1,017,750 |
| Orange County | $1,089,300 |
| Placer County | $763,600 |
| Sacramento County | $763,600 |
| San Benito County | $1,089,300 |
| San Diego County | $977,500 |
| San Francisco County | $1,089,300 |
| San Luis Obispo County | $911,950 |
| San Mateo County | $1,089,300 |
| Santa Barbara County | $805,000 |
| Santa Clara County | $1,089,300 |
| Santa Cruz County | $1,089,300 |
| Sonoma County | $861,350 |
| Ventura County | $948,750 |
| Yolo County | $763,600 |
You can find more information on the jumbo loan limits specific to where you’re looking to buy a home in California by using the FHFA map.
What are the requirements for a jumbo loan in California?
The requirements to qualify for a jumbo loan are more stringent than the requirements for a conforming loan. Each lender may have different requirements or processes, but below are the typical requirements for borrowers seeking a jumbo loan in California.
Higher credit score: In order to be eligible for a jumbo mortgage, most lenders will require a credit score of 720 or higher. While some lenders may be more lenient and accept a score as low as 660, a score below this threshold is generally not accepted. In contrast, a credit score as low as 620 could suffice for a conforming loan with certain lenders.
Larger down payment: Obtaining a jumbo mortgage typically requires a larger down payment compared to a conforming loan. Lenders may require a down payment of 10% to 20% or more, depending on the specific loan program and the borrower’s financial situation. If you’re approved with a down payment less than 20%, keep in mind you’ll most likely be required to purchase private mortgage insurance (PMI).
More assets: To qualify for a jumbo loan in California, lenders require borrowers to demonstrate that they have sufficient liquid assets or savings to cover at least one year of loan payments. The exact amount of assets needed can vary depending on the lender and the size of the loan, but having more assets can increase the chances of approval and potentially lead to better terms and interest rates.
Lower debt-to-income ratio (DTI): Whether you’re applying for a traditional mortgage or a jumbo loan, lenders will review your debt-to-income (DTI) ratio to assess your financial behavior and creditworthiness. The DTI ratio is calculated by dividing your total monthly debt payments by your gross monthly income. For conventional loans, some lenders may accept a DTI as high as 50%. However, for jumbo loans in California, borrowers are typically required to have a DTI under 43%, with a preference for a ratio closer to 36%.
Additional home appraisals: A mortgage lender may require a second home appraisal for a jumbo loan, in addition to the standard appraisal, to get a second opinion on the property’s value. This is especially true in places with limited comparable property sales. The additional appraisal helps lenders ensure that they are providing funds for a property that is worth the loan amount or more.
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