Section 4: Jumbo Loan First-Time Homebuyers
Purchasing Your First Home
Purchasing a first home is an exciting milestone in any person's life. For some, the process may also seem very intimidating. Buying a home can be challenging for a first timer. After all, there are so many steps, tasks, and requirements, and you may be anxious about making an expensive mistake. But first-time homebuyers actually enjoy some special advantages created to encourage new entrants into the real estate market. Please don't hesitate to give us a call or start your quote online.
How Much Home Can I Afford?
Typically, the first question would-be homebuyers ask themselves is, "What can I afford?" There are many factors that determine what a reasonable mortgage payment should be for an individual, including annual income, existing debt payments, down payment (if any), as well as additional costs like homeowners’ insurance and housing association fees. Orbit Home loans provides a handy VA Loan Payment Calculator to help homebuyers find a monthly payment that's comfortable for them.
Jumbo Loan Payment Calculator →
Contact an Orbit Home Loan Professional
What Type of Loan Should I Get?
There are many financing options available for homebuyers out there, each with their own unique advantages. For most borrowers, we at Orbit Home Loans highly recommend the working with one of our loan officers to find out what best fits your needs. Of course, if you are still researching then you can continue to explore our many loan options here on our website.
Advantages of a Jumbo Loan:
1. Higher Loan Limits
The first obvious benefit of a jumbo loan is that they are, well…jumbo-sized. Jumbo loans can be used to purchase bigger properties in areas where the housing market reflects higher average home prices. For homebuyers who don’t want to or can’t put down that much cash, a jumbo loan is actually a necessity for getting the property they want.
Remember that a jumbo mortgage is only for a personal residence. If you are looking for a large amount of capital for a real estate investing venture, a jumbo loan is probably not the way to go, despite its name. Rather, you should look into other financing options, like real estate crowdfunding, or other forms of private equity.
2. One Single Loan
A jumbo loan is going to be a single mortgage, which beats having to collect multiple loans in order to finance a property. As it turns out, most consumer-facing banks would be reluctant to extend a mortgage if another lender is involved, since it could present conflicts in regards to collecting the collateral of the property in the case of a default. However, there is nothing that prevents wealthy homebuyers from seeking private funding for their own personal residence. But if doing so would mean having to piece together several loans from several different people, a single jumbo loan with one single monthly payment becomes a much more attractive option. In a similar train of thought, a homeowner can also get a jumbo loan to refinance their existing debt, or as a second mortgage to fund another venture. In the case of everyday consumers, taking out a second mortgage usually implies financing a major life goal, such as funding their children’s or grandchildren’s college tuition, or (in the case of a reverse mortgage) retirement.
For an extremely wealthy individual who could pay for such large purchases using a credit card, taking out another jumbo loan may seem silly, but you’d be surprised to learn that the rich and famous actually use debt just as much as everyday consumers do to finance their life decisions. It just makes more sense because they can keep their assets and secure very low-interest rates because those same assets reduce their credit risk to a bank or lender.
3. Lower Down Payment
Conventional banks prefer when consumer borrowers put down 20 percent on a home. If they don’t, they will typically make the borrower take out a private mortgage insurance policy, which protects the lender if the borrower defaults. Thankfully for borrowers seeking a jumbo loan, they can often get away with a 10 percent or even five percent down payment on the property instead. Part of the down payment requirement is to protect the lender from the credit risk of the buyer. With jumbo loan borrowers, the bank is going to be sure the borrower is a solid candidate for funding before extending a loan. That said, they may determine that they are willing to accept a smaller percentage of the total home cost for a down payment. Even so, because of the high home price, the down payment is still going to be sizable. For these reasons, if a homebuyer is on the cusp of being able to afford a jumbo loan, they might factor that into their equation when determining what kind of property they’d like to buy.
4. Credit
Credit score requirements tend to be a little more stringent for jumbo loans. You'll need a strong credit history, which typically means a FICO® Score of 700 or higher for a jumbo loan.
5. Lifetime Benefit
VA loans get you into one of the best loan which you will be able to use and benefit from for the rest of your life.
6. Prepayment Penalties
Prepayment penalties are limited to 2 percent the first year, 2 percent the second year, and 1 percent in the third year. Points and fees are limited. Loan terms cannot exceed 30 years. With Orbit Home loans you will not have a prepayment penalty.
7. Foreclosure
Jumbo guidelines are going to typically require a minimum 7 year wait from the date of the foreclosure date, and 4 years from the bankruptcy discharge. If you can use Conventional financing, and the foreclosure took place after the discharge of the bankruptcy, your wait is 4 years from the BK discharge.
8. Appraisal
Jumbo loans involve a larger transaction amount than traditional mortgages, the appraisal often undergoes special scrutiny. If your loan amount is high enough, it could even require two appraisals. The good news is that the loan limit for which you'll need a second appraisal has risen in many cases.
9. Loan Limit
A Jumbo mortgage is a home loan for an amount that exceeds conforming loan limits established by the federal housing finance agency. The conventional loan limit in many California counties is $647,200. However, in select California counties such as Sacramento County, the maximum conventional loan limit is $675,050.
10. Debt to Income
You can get approved for a jumbo mortgage with a debt-to-income ratio as high as 45%, but these loans often have higher reserve requirements than conforming loans. You may need to show one year's worth of mortgage payments in your bank account.
Getting Preapproved
The first step toward securing your loan is getting pre-approved. This involves a prequalification process, where a loan officer assesses the homebuyer's financial situation and determines what they qualify for and is followed by the homebuyer submitting a completed loan application to the lender for approval. Orbit Home Loans offers two ways to begin this process: You may either call us directly or reach start the application below to get a complementary call.
Contact an Orbit Home Loan Professional
Finding a Real Estate Agent
When using a Jumbo Loan, it's important to find a real estate agent that not only knows the intricacies of the JUMBO LOAN Benefit Program, but also understands the specific needs of borrower. Orbit Home Loans has put together a network of friendly real estate agents for just this purpose.
Learn More about Orbit Realty →
Helpful Resources
- The Guide to Jumbo Loan Homebuying
Browse our VA homebuyer education and resources page. - Jumbo Loan Home Loan Mortgage Payment Calculator
This free VA Home Loan calculator gives you a snapshot of what your monthly payments could be with a VA Loan. - Jumbo Loan Glossary
Use our glossary to reference any unfamiliar terms or acronyms.
As a first-time homebuyer, you have many options when it comes to purchasing your home - including homes in high-cost areas.