As a loan officer in California I specialize in the jumbo loan market. I have been encouraged recently by the re-appearance of some lenders (Suntrust, Citimortgage) into the jumbo loan space. Despite the increased competition, it is still very difficult to obtain a jumbo loan because of the strict underwriting guidelines.
I have done a survey of my jumbo loan sources with the purpose of finding some minimum standards required in each area of underwriting. Here is what I have found:
Stated income is virtually non-existent. However, I have one jumbo loan lender that will do stated income for large loan amounts. I wrote this blog post about the program.
The maximum loan-to-value percentage is 80%. In my area the maximum agency loan for a single family residential is $729,750. If you need to borrow more than this amount, you are limited to 80% of the property value.
The maximum combined loan-to-value percentage for a jumbo loan is also 80%. By combined loan-to-value percentage I mean the total amount of a first mortgage and second mortgage added together in comparison to the property value.
The minimum credit score allowed is 650. The score used to qualify is the middle score. If there are two or more borrowers, the lender will use the lowest middle score. The guidelines regarding credit score for a jumbo loan used to allow the lender to use the middle score of the primary wage earner.
The maximum debt-to-income ratio for a jumbo loan is 50%. This maximum is exclusive to one lender. Most require a debt-to-income ratio of 45% or less. Several are at 40%. Most of the lenders tell us there are no exceptions to these guidelines.
All loan programs with an interest-only payment option are qualified at the principal and interest payment. This requirement has presented some interesting problems for borrowers who are attempting to refinance their jumbo loan. I have presented quotes to clients in which their payment would go down significantly. However, because the lender requires the principal and interest payment to be used to qualify, they cannot, because the debt-to-income ratio has become too high with a principal and interest payment.
The maximum loan amount is $5,000,000. This maximum for a jumbo loan is not too limiting because there are very few borrowers who would like to borrow more than this amount, even in California. However, most of my lending sources have a maximum loan amount between $1,500,000 and $2,000,000.
The minimum amount of cash reserves is 6 months of PITI. PITI stands for principal, interest, taxes, and insurance. We do have one jumbo loan lending source that does not ask for verification of reserves, however, this is definitely the exception, not the rule.
Most jumbo loan lenders have a maximum amount of cash a borrower can take out - $350,000. However, there are a few lenders that allow more, but they generally are not as competitive with their rates.
A jumbo loan for a second home has a maximum loan-to-value percentage of 75%. Be prepared to prove that it truly is a second home with your tax returns. If income is declared for your second home, it is very difficult to get your loan approved as a second home.
The maximum LTV for an investment property is 65%. Very few lenders have a jumbo loan product for this category.
AS you can see from this survey of my sources, the credit guidelines for a jumbo loan are tight. There may be other lending sources that I am not aware of that have guidelines that are "easier" than what I have posted here. If you know of easier guidelines, feel free to comment.
Visit My Facebook Business Page
Do you need help structuring a loan, or getting a rate quote? Call me at (650) 222-0386, or e-mail me.
This is not an offer for extension of credit or a commitment to lend. All loans must satisfy company underwriting guidelines. Information and pricing are subject to change without notice. This is not an offer to enter into a rate lock agreement under any state law.
Hello Phil,
Tell me are you having much success with the jumbo stated loans there in California? I sure hope so, for there are other places which might really need such. I am not a loan officer but I do some consulting working with an organization that has a jumbo stated loan program that is almost guaranteed for the qualifiied applicant. May I'll be able to share some of that information at some point here in the future. Much success in your business.
Charles
Charles, We still have stated income jumbo loans in California. Hpwever, as of October 1, there has been new laws that have gone into effect that has restricted stated income jumbo loans on principal residences. My understanding is that the new laws for stated income jumbo loans do not affect second homes and rental property.
Nice post. There are really a lot of reasons why its hard to get a jumbo loan in California. But do not let that stop you stop by your mortgage company and see the options before you drop your interest in it. Who knows this might give you the chance to buy your own dream house!
I guess it is now resricted to portfolio lenders for stated income jumbo loans. It makes no sense to me, ahigh cost state with no stated income jumbo loans or shark type rates