5% down jumbo loan financing refers to mortgage loan amounts over the conventional loan limit set by the Federal Housing Finance Agency (FHFA). For these loans, mortgage lenders must target large private banks and credit unions to obtain financing.
These investors can create their own set of qualifying guidelines that will vary widely between different investors.
What is a Conventional Loan Limit?
A conventional loan limit is a maximum amount you can borrow for a conforming loan with Fannie Mae and Freddie Mac. This amount fluctuates each year depending on the average home price for the previous year.
Conventional loan limits are set per county and can vary based on the average price for that specific area. With that said, the conventional loan limit in most states is $647,200.
What is the Conventional Loan Limit in California?
The conventional loan limit is typically higher in more expensive states like New York and California. The current loan limit in these states is up to $970,800 in some areas. This is important for borrowers looking to stay under this amount as qualifying guidelines are less stringent than jumbo financing.
Because of the added risk for higher loan amounts, 5% down jumbo loan financing comes with more stringent qualifying guidelines.
There are a few main features of 5% down jumbo loan financing that create more stringent guidelines.
These main features are credit scores, debt ratios, housing history, reserve funds, and down payment amount.
Can You Get a 5% Down Jumbo Mortgage Loan in California?
Many programs offer lower down payment options for those looking to stay under the county loan limit. Once the loan amount goes above the county limit, down payment requirements will typically jump to a 10% down minimum.
There are some lenders with 5% down jumbo programs. However, those will be few and far between with strict guidelines and higher adjustable rates.
With that said, the 10% down payment mark is where many jumbo investors come into the market.
Some programs can help you get into a home with less down than the typical 20%. These jumbo financing programs have tougher requirements and higher interest rates. However, they can be solid options for those who qualify.
When making a down payment of less than 20%, additional reserve funds are almost always required. This can become problematic if you are cash-strapped.
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December 7, 2023
What Other Low Down Payment Options Are There?
There are a few other low down payments options that are a great way to maximize purchasing power without coming in with a full 20% down.
Combination Financing
Combination financing is a great option to consider consisting of two different mortgage loans provided by the same lender to the same borrower.
There are several instances why you may consider combination financing. However, avoiding the strict jumbo guidelines and a full 20% down payment are most notable.
You can come in with 10.01% down to receive the conforming financing up to the loan limit. Then, you can receive a HELOC to stretch purchasing power.
Maximum lines of credit will vary between different investors but many lend up to $500K.
This is a great loan option for you if you are a borrower in with limited reserves and funds for the down payment.
There are many creative solutions to keep cash out of pocket minimal. However, it is important to remember nearly all jumbo investors will require more than just 5% down.
Talk to a Mortgage Expert Today About 5% Down Jumbo Loan Financing
Talking with a lender to see what programs and options are available with less down is always worthwhile.
JVM’s mortgage experts can determine if 5% jumbo loan financing makes the most sense for you and answer any other questions or concerns you might have. You can reach us at (855) 855-4491.
