Jumbo loans in Monterey, CA, are a mortgage option that finances high-value properties that conventional conforming loans cannot. Because the market is relatively small compared to conforming loans, it is understandable that it is more competitive. However, this does not mean you do not have any chances to find a great deal and get approved. All you need is to do your assignment. Prior research is necessary to get the upper hand in the market.
Here are some of the most important things you should know about and work on:
While conventional lenders allow borrowers to put as little as 3% down, jumbo lenders may require as much as 20% for a down payment. That is because, with jumbo loans in Monterey, CA, no private mortgage insurance protects them in case of default.
Debt-to-Income (DTI) ratio
Your debt-to-income (DTI) ratio provides crucial information about how much debt you have compared to your income. To qualify for jumbo loans, a lender requires you to have a stable financial safety net, reflected in lower debt-to-income ratios. Conventionally, a DTI ratio of 43% or less is best to qualify for a jumbo loan. However, some lenders may be flexible enough to accept your jumbo loan application if you have a lot of cash reserves.
A FICO score of 700 or above is the requirement for most jumbo loan applications. Although some lenders will accept a score of 680, the interest rate is likely to be higher – two or three percentage points. That score is proof that you are reliable and will make on-time payments, which is necessary for lenders, considering the higher risk on their end.
Like in conforming loans, lenders usually require pay stubs, bank accounts, tax returns, and brokerage account statements for jumbo loans. Jumbo loan applications undergo a more rigorous, time-consuming assessment. More or less, the entire process could take between 45 and 60 days for approval.