Jumbo loans are different from conforming loans in many different ways. In today’s blog entry, we will discuss four factors that you need to know about before you apply for a jumbo loan in the Los Angeles area. If you have more questions about jumbo loans, or self-employed mortgages, please contact us at CalSun Mortgage. Our team has the experience and knowledge to be able to help you figure out the best path towards buying a home.

You Will Probably Need A Larger Down Payment

Conforming loans, meaning loans that fall within the loan limits of a given county, can be secured with a relatively low down payment — sometimes they only require 3%. But for jumbo loans, a higher down payment is required. The down payment on a jumbo loan can be 20% or more. For a lot of people, this might mean that a jumbo loan just isn’t an option.

Jumbo Loans Usually Have Higher Interest Rates

Lenders who provide jumbo loans charge higher interest rates as a way of protecting their investments, and because jumbo loans don’t have the same kind of built-in protections that a conforming loan has.

A Jumbo Loan May Require A Higher Monthly Payment

Because jumbo loans are for larger amounts of money than a conforming loan, the monthly payments will be higher. This is due to a combination of higher interest rates and higher principles. A higher down payment can help keep the monthly payments lower, but be prepared to spend more each month.

A Jumbo Loan May Require A Lower Debt To Income Ratio

Your debt to income ratio is an important factor in any loan, and it is even more important when you are trying to get a jumbo loan. A debt to income ratio of below 43% is almost always required. Lenders want to see better DTI when they are lending out more money because it means that they are more likely to keep getting paid every month.

If you have more questions about jumbo loans, please contact the CalSun Mortgage team today.