Jumbo

Jumbo loans are exactly what they sound like — large loans for expensive homes. They differ by amount from state to state and are not purchased by Freddie Mac or Fannie Mae. 

In California, homes with loan amounts greater than $1,089,300 are considered  jumbo. For reference, if you hear the term non-conforming loan, it’s the same as a jumbo loan. 

To qualify for a jumbo loan, buyers must have a lower debt to income ratio than the 45% to 50% for conforming  loans, and, typically; higher FICO scores.  Also, sometimes buyers must prove they have enough cash on hand to cover 12 to 24 months of mortgage payments. 

Depending upon the lender, down payments for jumbo loans can be as low as 10%. More often than not, though, they are usually 20% to 30%.

Interest rates for jumbo loans are higher than for conforming loans due to the greater banking risk jumbos pose. Closing costs are also higher because many of these costs are directly tied to the larger loan amounts.