San Jose and the surrounding areas have been dubbed one of the hottest housing markets in the country. It is also one of the most expensive. Chances are, if you are buying a home here, you may need to borrow more money for a mortgage than the current conforming loan limits. This means you will need to apply for a jumbo loan. So what constitutes a jumbo loan and how do you find one that is right for you?
Right now, loan limits for FNMA (Fannie Mae) and FHLMC (Freddie Mac) are currently at $726,525 for a single-family home in Santa Clara County. For many borrowers, this simply is not enough to purchase the home they are considering. That is when a jumbo loan comes into play.
Jumbo loans in San Jose — often called non-conforming mortgages — come in both fixed or adjustable rates and with a variety of different terms. They can’t be guaranteed by Fannie Mae or Freddie Mac so the lender is not protected if a borrower defaults. Because jumbo loans carry a bigger risk for a lender, they will typically use stricter approval criteria for jumbo mortgages.
This usually involves:
A strong credit score — jumbo loans typically require a higher credit score, often in excess of 700.
A lower debt-to-income ratio — lenders want to ensure that a borrower is not over-leveraged
Two sets of appraisals in some cases
A larger down payment, sometimes up to 30 percent
Six months or more of cash reserves
Documentation to support the borrower’s financial health including tax returns, W-2s, 1099s and bank statements
Depending on the lender, interest rates and closing costs may be higher than conventional conforming loans but not always. Many lenders offer jumbo loans that have competitive rates and even some that are lower. That is why it is important to shop different lenders.
Because lenders are all different and have differing approval criteria, you want to make sure you are getting the best possible mortgage for your individual financial needs. This is when having the expertise of an independent mortgage broker can help. While good rates and terms for jumbo loans do exist, it’s important to know where to find them. That is when we can help.
At Alliance Lending, we work in partnership with a broad array of different mortgage lenders, many offering jumbo loans in San Jose. We can help you find a jumbo loan that is perfect for your needs.
Alliance Group & Associates Inc. is an Equal Housing Lender. As prohibited by federal law, we do not engage in business practices that discriminate on the basis of race, color, religion, national origin, sex, marital status, age, because all or part of your income may be derived from any public assistance program, or because you have, in good faith, exercised any right under the Consumer Credit Protection Act. Disclaimer: Programs subject to change without notice. All borrowers must qualify per program guidelines.