Written by Jason Kritzberg on February 27th, 2021
If you are like many people and wanting to buy a home in Los Angeles, sometimes you might need a loan to help out. Los Angeles is notorious for high home prices and the listing price might not fit completely in your budget. What if the home you want to buy is more than $548,250 and you need some assistance? Then you should look into applying for a Jumbo Loan!
For 2021, if you require a loan amount surpassing the $548,250 – $822,375 (depending on the county your buying in) conforming loan limit set by the Federal Housing Finance Agency (FHFA), then you’ll need to get a jumbo loan. In certain “high-cost areas,” this limit may be set higher to account for higher average home values. Jumbo loans are not backed by government-sponsored entities like Fannie Mae and Freddie Mac. Otherwise, jumbo loans are just like conforming loans, as they come in fixed-rate and adjustable-rate variations with multiple lengths.
Requirements for the Loan
Before you Contact Stephen White, your local realtor, to begin your home search process, its always best to have a good idea of how much house you can afford. If you are earning a large income, have some significant savings, and have a good credit history, a jumbo loan may be an option for you.
Qualifying for this loan is definitely more difficult then qualifying for a conforming loan! For starters, many lenders will require a credit score of 700 or higher for you to even be approved for the loan. A conforming loan can get approved with much lower scores by making a larger down payment.
Next, you will need to prove how financially stable you say you are. Your lender might ask for you to provide tax returns, W-2 or 1099 forms as well as bank statements. These factors will determine how much of an interest rate you will get on the loan. Less to show = higher interest rate or possible disapproval for the loan.
Jumbo Loan vs Conforming Loan
If you’re buying an expensive home, you can expect its peripheral costs to also be a bit pricey. The same applies to jumbo loans. While many lenders will consider lowering their down payment requirements for jumbo loan applicants, most still call for the industry standard of 20%. If you make a down payment lower then 20%, you may have to buy into private mortgage insurance which isn’t cheap.
Any time you’re dealing with a larger mortgage, fees are inherently going to be higher as well. These usually include origination fees, title insurance, inspection fees and service fees, which are known as “closing costs.” Be prepared to pay these when you close on your new home. Great news! Did you know that VA loans in California no longer have a county limit for 2021? The VA announced that Former President Trump signed the Blue Water Navy Vietnam Veterans Act that removes all county loan limits for Veterans. To learn more about how you can purchase a home with VA, Jumbo, and Conventional Loans, contact Stephen!
The bottom line is that buying a home is a major financial move. If you can’t afford it yet, keep saving until you can. Consider hiring a financial advisior if your worried how your purchase could affect your financial plan. A trusted realtor, like Stephen White, can also assist in the process!
