Using a Jumbo Loan to Buy Your Luxury Home in La Quinta. A jumbo loan is just a BIG loan, right? While this is true, if you opt for a jumbo loan, you can get a loan with a higher price point than you would using a conforming loan.
Fannie Mae and Freddie Mac determine the conforming loan amounts and guidelines. As a result, the jumbo loan, a non-conforming one, may have higher loan limits.
Currently, the conforming loan limit is $647,200 in most areas in Riverside County/Coachella Valley. However, Los Angeles and some other areas have a higher conforming loan limit of $970,800.
“Fannie Mae and Freddie Mac use a county’s median household income to define what the conforming loan cutoff is for that particular area,” explains Richard Redmond, a mortgage broker at All California Mortgage in Larkspur and author of “Mortgages: The Insider’s Guide.” REALTOR.com
Homes in Palm Springs and La Quinta areas are generally listed for more than the conforming loan limits allow; therefore, you may need to use a jumbo loan unless you use cash to purchase your home here. Luckily, you may use a jumbo loan to purchase a primary residence, second/vacation home, or investment home. Jumbo loans may also be adjustable or fixed.
What do you need to qualify for a Jumbo Loan?
Generally, borrowers with a credit score of 700 or higher may face a more stringent credit qualification; however, each lender will set their requirements for your loan.
While jumbo loans used to be prevalent before the housing crisis, many financial institutions pulled out of the market at that time. Now jumbo loans generally originate through banks like JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, PNC Financial Services Group, and SunTrust Banks.
Jumbo loan Down Payment Requirements
To avoid any Private Mortgage Insurance (PMI), most lenders will require a 20% down payment, with some requiring 25% down. Lenders have a variety of ways for you to finance the purchase of your home in the Palm Springs area, so it’s always best to chat with them.
INTEREST RATES on Jumbo Loans
According to Money.com, the Jumbo loan interest rate today on a 30-year fixed is 4.934%, while other 30-year fixed-rate mortgage rates have increased to 6.875%, almost 2% higher than a month ago. HOWEVER, back in 2010, when we were coming out of the recession, interest rates were hovering around the 4.69% interest rate, and we thought we were in financial heaven!
Home prices are still increasing, and even with the higher interest rate, you’ll be gaining equity down the road. Locking in now will save you from any future interest increase.
What goes up must come down, and interest rates will eventually get back to normal.
What are your options for purchasing your home in the La Quinta, Indian Wells, Palm Desert, and Rancho Mirage areas? Give me a call, and let’s discuss the local market, interest rates, and the best way for you to proceed in the Coachella Valley real estate market.