Many experts agree with today’s low rates, it makes sense to leverage your assets as much as possible when financing a home. However, with home values still on the rise from San Francisco to San Diego, jumbo loans are typically the financing vehicle of choice. Leveraging a home with a jumbo mortgage means putting as little down as possible to obtain the loan, all the while preserving cash to be used for other investments. There are 100% financing options available in California but those programs are reserved for conforming loans, not jumbo. Yet even though there aren’t $0 down jumbo loans available, there are a few 95% options that are very close. Qualified buyers today can finance a luxury home with as little as 5%, preserving your capital for other purposes.
For an extended period, jumbo loans were only available to those who could put down 20% or more to qualify for a jumbo. Yet as credit guidelines have solidified and the real estate and mortgage markets have rebounded nicely. As a result, there are jumbo loans in California that require a down payment of only 5%, not 20% or 30%.
Interest rates for a 5 percent jumbo loan are very competitive, however, they will be slightly higher compared to a loan with a 20% down payment. This is often the case for any loan as down payment amount is the main factor in determining overall loan risk. For example, let’s say there is a home listed for sale at $1.25 million. Traditionally, a 20% down payment meant coming to the closing table with a down payment amount of $250,000 plus closing costs and cash reserves. With a 5% amount, that results in a down payment of just $62,500.
Jumbo loans with less than 20% down can be structured in a few ways. The most popular option is a combo first and second mortgage – often referred to as a “piggyback” loan. Or one simple single loan, both these options do not require mortgage insurance. There are pros and cons with each option depending on the buyer’s loan amount, down payment, credit profile, etc. Please read more about all the Jumbo loan requirements here.
Eligible military Veterans should also take a look at the VA Jumbo options available. Read more info under the Jumbo Purchase page. The VA Jumbo mortgage offers approved vets some of the lowest down payment Jumbo options available today.
When deciding on how much you should put down on a home it’s important to consult with your financial planner to determine the impact of a smaller or larger down payment would have on your retirement goals. At the same time you should discuss various jumbo loan options with your loan officer and with this information you will have enough to keep your financial plan intact as while taking advantage of today’s low rates.
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