People who want to buy a home in Los Angeles can need a super jumbo mortgage to finance their home purchase. “Jumbo” says “large,” but how large are super jumbo mortgages and how do they work?

We’ve put together some of the basics about jumbo mortgages and how they work.

What Are Super Jumbo Mortgages?

Jumbo mortgages are home loans in amounts that exceed the Federal Housing Finance Agency (FHFA) limits for government-backed loans. For 2023, the conforming loan limits for Los Angeles County are $1,089,300 for a single family home, ranging up to 2,095,200 for a four-unit property.

Mortgages for more than these amounts are considered “jumbo” mortgages. A loan becomes a “super jumbo” mortgage when it exceeds $650,000, although you will find some lenders who use $1 million as the base for a super jumbo mortgage. 

In Los Angeles County, with a median home sales price of over $1 million, many jumbo mortgages are also automatically “super jumbo” mortgages.

How Do Jumbo Loans Work?

Jumbo mortgages aren’t guaranteed by home loan agencies like Freddie Mac and Fannie Mae. As a result, they operate under a different set of criteria.

Whether they are a regular jumbo or a super jumbo mortgage, these loans usually require better credit than smaller mortgages. The reason? Conforming or conventional mortgages can be backed by Fannie Mae or Freddie Mac, reducing the lender’s risk. In addition, the larger mortgage amounts also carry additional lending risk.

You will also find that jumbo mortgages require a debt-to-income (DTI) ratio lower than 43%. These mortgages also typically, but not always, require good credit scores.

Do Jumbo Mortgages Have High Interest Rates?

In the past, many jumbo mortgages had higher interest rates than non-jumbo mortgages. However, Investopedia reported that in 2022, some 30-year fixed rate jumbo mortgages had lower interest rates than 30-year fixed-rate conforming mortgages.

Do You Need A High Down Payment For A Jumbo Mortgage?

In previous years, many jumbo mortgage issuers required a 30% down payment for a jumbo loan. This high level of down payment is no longer required. 

Working with an expert mortgage broker, you can determine which jumbo mortgage is right for you. Each borrower’s situation is unique. Contact California Platinum Loans today to learn which super jumbo home loan is right for you.

Sources:

Investopedia Team, “Jumbo Loan,” 21 December 2022

U.S. Department of Housing & Urban Development, “Maximum Mortgage Limits 2023”