Los Angeles Jumbo Financing with Low Down Payment

Many home buyers are familiar with the term “jumbo” as it relates to the mortgage business, especially if you live in a higher cost location like California. A jumbo loan is one where the mortgage amount exceeds the county conforming loan limit. These limits are set each year by the Freddie Mac and Fannie Mae and are currently $679,650 in most counties surrounding Los Angeles. So if you require a mortgage above this amount, it would be considered a jumbo loan.

These days there are a few sources for most home financing. First, the government-backed loans who guidelines are issued by the VA, FHA, and USDA. Second, Conventional loans are those that are approved and guaranteed by the individual lenders and banks and carry zero government-backed guarantee. Third, portfolio loans are those where the lender is using its own internal underwriting guidelines to approve loans with no intention of selling the loan, but instead, keep the note long-term and collecting interest each month.

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Each mortgage program has its own requirements and one of these requirements is the maximum loan limit set for each loan type. For example, in most parts of the U.S, the conventional conforming loan limit is currently at $453,100. The exception would be high-cost areas like CA, Florida, DC, etc. The FHFA will review median home values later this year and make adjustments as needed.

California Jumbo Loan Qualifying

Beyond the loan limits, there are other basic requirements that most jumbo programs have. For example, jumbo loans can require a higher credit score in order to qualify compared to a conforming loan. The minimum credit score for most conforming loans might be 620. However, with a jumbo loan, the minimum could be 680 or even higher, depending upon the down payment and other variables.

Jumbo loans also compare monthly income and compare that income with the total amount of credit obligations. Mortgage companies will verify income for jumbo loans by reviewing the most recent pay check stubs covering a 60 day period. It is the gross monthly amount that is used for qualifying purposes. Copies of the last two years of W2 forms will also be required. For self-employed borrowers or for those receiving regular income from sources other than an employer, copies of the two most recent federal income tax returns will be needed along with a year-to-date profit and loss statement.

Many luxury home buyers are self-employed and own their own business. These buyers can also expect to provide copies of recent business tax returns in addition to personal returns. Lenders will review year-over-year income and determine the consistency of income. Lenders typically take the two years of income, add them together and then divide by 24 (months) to arrive at a monthly qualifying income. Lenders will also consider year-to-date income as part of this overall calculation.