The Ultimate Guide to Getting a Jumbo Loan in Sacramento, CA

Most US mortgages are conventional loans that are eventually sold to Fannie Mae and Freddie Mac. Loans need to follow strict guidelines in order to be sold to these agencies.

In general, loans need to meet the conforming loan limit in a particular area to qualify. In most of the country, a loan needs to be less than $647,200.

However, in certain parts of the country, conforming loan limits are higher, since the average price of a home is much higher, such as the Bay Area.

Alternatively, you can apply for a jumbo loan, which is a mortgage that is worth more than the conforming loan limit. Jumbo loans are usually used to purchase luxury properties.

Are you looking to buy a large or luxurious home in the Sacramento area? Then read on below to learn about how to qualify for a jumbo Sacremtno loan today. 

What Is a Jumbo Loan?

Jumbo loans are mortgages worth more than the conforming loan limit. As mentioned above, jumbo loans are those that start at $647,200 in most parts of the country.

In parts of California, Hawaii, and Washington DC, the conforming loan limit is $970,800. So a jumbo loan in these areas would start at that number. 

Because the mortgage loan is worth much more than a conventional loan, borrowing requirements are a bit more strict. Luckily, there is usually the option to put less than 20% down on a jumbo loan, making them more accessible. 

Loan Limits in Sacramento

Many counties in California have higher conforming loan limits due to the median home prices in those areas. Alameda County, for example, where Berkely and Oakland are located, has a conforming loan limit of $970,800.

Other counties in California with the higher limit include San Francisco, San Mateo, Santa Clara, Marin, Los Angeles, Contra Costa, San Benito, and Orange counties. 

Sacramento County has a conforming loan limit of $675,050. A jumbo loan in the Sacramento area would be any loan higher than this amount. 

How to Qualify for a Jumbo Loan

Jumbo loans can be used on nearly any type of property. Most use them for their primary residence. But they aren’t limited to primary residences and are also available for a vacation home or investment property.

For a single-family primary residence, it’s common for lenders to require 20% down. However, with an increase in demand for jumbo loans due to a hot housing market, many lenders are making them more accessible, offering a 10.01% down payment.

For multi-family properties, vacation homes, or rentals, down payment requirements are usually higher, starting at 15%. 

To qualify for a jumbo loan, you’ll want your credit score to be in excellent shape. A minimum of 700 is to be expected. For more expensive properties that exceed $1 million, you could see lenders set a 720 or 740 credit score requirement. 

And just like a conventional mortgage, you’ll want your debt-to-income ratio to be as low as possible to tell lenders you have enough cash each month to comfortably make your mortgage payment. 

A maximum DTI of 45% is to be expected. 

Specific Requirements for Jumbo Loans

The above requirements are similar to qualifying for a conventional mortgage. There are a few additional things to keep in mind if you are considering a jumbo mortgage.

The big one is the need for cash reserves. Lenders want to see that you have enough cash in the bank to make six to 12 mortgage payments, to ensure you won’t fall behind. 

Oftentimes, funds in an investment or retirement account can qualify towards your reserves (since you ideally won’t need to touch them). 

On top of cash reserves, you can expect to pay higher closing costs than one conventional loan. You can pay anywhere from 3% to 6% in cash at the time of closing in order to secure a jumbo loan, rather than the average 2% to 3%. 

You’ll also be subject to manual underwriting. Since jumbo loans are unique, an underwriter will need to manually comb through your credit report, tax returns, and bank statements to ensure everything looks perfect before issuing the mortgage.

If there are any past issues, you can expect those to come to light. 

Jumbo Loan Mortgage Rates

In many instances, jumbo loan rates are a tad bit higher than conventional loan rates, due to higher risk for the lender.

In other cases, some lenders offer lower rates, since they deem jumbo loans lower risk, thanks to cash reserves and stricter borrowing requirements. That means, on average, you can expect a rate on par with conventional loan rates. 

You can qualify for lower Sacramento home loan rates by increasing your LTV. Putting at least 20% down will ensure you get the best rate. Having the highest credit score possible will also help. 

Jumbo VA Loan

Many lenders will also offer a jumbo VA loan. With this loan, you can qualify for a jumbo loan without having to provide a down payment. 100% of the purchase price can be financed.

And with VA loans, there’s usually no loam limit in place on jumbo loans. And in some cases, a DTI up to 60% is acceptable, making VA loans some of the most accessible to qualifying service members. 

To qualify for a zero-down payment jumbo loan, you’ll need a credit score of at least 640. However, if you want a more expensive home, in excess of $1.5 million you can expect a higher credit score requirement and down payment requirement of up to 10%. 

The property will need to be your primary residence. But it can be a multi-unit home, so long as you occupy one of the units. 

80-10-10 Loan

In some cases, borrowers who need a jumbo loan, but don’t have a lot of capital dow a large down payment, can qualify for an 80-10-10 loan.

This is a combination mortgage where you finance 80% of the purchase price, then take out a second mortgage for 10% of the down payment. With this loan, you would only need to put 10% down at closing, but you’ll have two loans to manage. 

Apply for a Jumbo Loan Today

Are you ready to find your dream home in the Sacramento area? Then it’s time to get prequalified for a jumbo loan so you can start your home search today.

At United Wholesale Lending, we specialize in the Sacramento area. Get prequalified on our website today so you can move in as soon as possible.