When you begin looking in your city or town to purchase a lovely new home, mortgage shopping might need to be your first shopping stop. If you have a price range in mind for your starter or dream home, you’ll need to ensure that a lender will loan you the amount you need. This is called the pre-approval process, and it doesn’t have to be difficult. You might need to pay an application fee, but otherwise – mortgage shopping shouldn’t cost you much.
A jumbo loan, or jumbo mortgage, can be a part of your search. Jumbo mortgages are home loans that exceed the “conforming limit” – which is the maximum amount of loan money you can get from Fannie Mae or Freddie Mac (the Federal Housing Authority). This limit varies depending on your location in the United States, but is typically $417,000. In Santa Clara, CA, the current limit is $636,150. If you’re looking to get a pre-approval for a mortgage, you’ll need to make sure you qualify for the jumbo loan you seek. This is exceptionally important, as you’ll need to know exactly how much you can set your home-buying budget for. Additionally, house sellers aren’t typically keen to negotiate unless you’ve been pre-approved, for a jumbo loan or otherwise.
Jumbo loans aren’t what they used to be
After the housing bubble burst in 2008, the requirements for jumbo mortgages and home loans became much more stringent. While it’s still possible to get a jumbo home loan, you’ll be subject to tighter controls and will need to provide much more information.
To qualify for a jumbo loan in today’s California real estate market, you’ll need to expect the following:
- You will be asked to put down 20% of the house’s value up front. If not, you will need at least that 20% equity in a refinance.
- You will almost certainly be getting an adjustable rate mortgage or loan. Fixed-rate jumbo loans are almost unheard of.
- You will have to document your income.
- Your monthly mortgage payment must not be more than 38% of your pre-tax income.
- You need to expect your credit score to be run by prospective lenders or mortgage brokers. This shouldn’t affect your credit rating as long as you wait 45 days between checks.
Additionally, it’s best if you understand the difference between a direct lender and a mortgage broker. Either one of these types of borrowers can pre approve you for a jumbo loan. A mortgage broker functions as a middleman – they don’t give direct loans, and will ultimately charge fees upon approval of your home loan. Brokers aren’t all bad, though. They can often help you find the best rate. Loan officers are direct representatives of banks, and – although there is no middle man – working directly with a loaner can narrow your options. Jumbo loans, however, come mostly from big banks.
Required documentation
It’s smart to have all your ducks in a row before seeking a jumbo mortgage for California real estate. Make sure you’ve gathered the following documentation before seeking out a jumbo loan:
- Your last two years federal and state tax returns, including your W-2 and/or 1099 statements
- At leas your last four pay stubs
- Six to twelve months of your recent bank statements
- Your 20% or more down payment, and evidence of that money – in a checking, savings, or investment account
Will I get approved?
You’re likely applying for an adjustable-rate jumbo loan for your future mortgage, and it’s important to know your chances of approval. Several factors can impact this:
- Your credit score. The higher your score, the lower your interest rate. You’re also more likely to get approved. Make sure your credit report is free of errors before applying for a jumbo loan.
- Your income. If your income is higher, you’re likely much more qualified to take on significant mortgage payments.
- Employment history. Have you been steadily employed for several years? You’re much more likely to qualify for a jumbo loan.
- Down payment. If you want to qualify for this type of loan or mortgage, you’ll need at least 20% of the money down.
Buy your dream home in the Santa Clarita Valley
Brian Ends is the Local Real Estate Expert, and President of the SCV Agents, Inc. Brian and his associates are here to help you through the entire home buying process. We help buyers obtain their dream houses in the Santa Clarita Valley. Let us get you into your next house! Call 661.964.1760 today.
