Jumbo Mortgages Remains the Best Choice for California Real Estate Buyers

A “conforming mortgage loan limit” is most literally where the loan traits conform to the loan rules set forth by Fannie Mae or Freddie Mac. There are many rules regarding the loan traits but one in particular that states that neither of their mortgage guideline will securitize a mortgage that’s considered too large for its books. How do you know if your loans are too large?
Fannie and Freddie Mac will release their conforming loan limits each November, for the upcoming year. This year the loan limits are expected to remain unchanged at $417,000, and a high-balance limit of up to $625,500. This can benefit home buyers because Fannie and Freddie backed loans can be the cheapest forms of financing. As for existing home, if conforming loan limits drop the scores of households would be “loan-sized out.” The FHA and VA will leave their loan limits unchanged and they can reach as high as $729,750.
This is an annual decision base on the economy at the time along with home price data, thus creating a “loan size limit” on the amount of mortgage that will be allowable – anything past that limit will be a “jumbo” loan.
A high priced home may require a jumbo mortgage, but it is not always necessary to obtain a non-conforming jumbo mortgage, also known as a private loan held by the lender. You may have the option to decide whether you want a non-conforming jumbo mortgage vs. a conforming jumbo mortgage.
A conforming jumbo mortgage is one that follows the guidelines set by Fannie or Freddie and is sold on the secondary market and are easier to obtain than a non-conforming mortgage. Today, the conforming loan limit in the US is $417,000. However, this may vary due to the median home price and your area.
Fixed-rate mortgages in conforming limits usually get a better rate compared to jumbo fixed-rate mortgages; they also often require fewer loan fees. FHA mortgages and VA loans also have higher loan limits, which directly depends on the location of the home. Location plays a huge part in the maximum amount that can be borrowed. While, both do have their benefits they come with a price. FHA mortgages have an upfront and annual mortgage insurance payment and VA loans have a VA funding fee.
If you need financing above the conforming loans limits or even the FHA loan limit, you will need a traditional non-conforming jumbo mortgage. You cannot get these mortgages from Fannie, Freddie, the FHA, or the VA. They are usually sold by private lenders and held within their portfolios, in which they can decide on their own guidelines and mortgage rates. These loans may be of higher risk for the lender, but they have a trend of also being very profitable.
The decision between a non-conforming or a conforming jumbo mortgage depends on the amount of financing needed. In some cases, if you have enough cash, you can be a bit more flexible; use the cash to reduce the loan of conforming jumbo mortgage or keep your money and go for a traditional non-conforming jumbo mortgage.