Here’s a mortgage tip: if you are looking for the best interest rate on a Jumbo Loan consider a 5, 7, or 10 year product.

The availability of Jumbo Loans in Sonoma County through a Fannie/Freddie Lender have nearly evaporated since 2007. However in the last several months, Jumbo have re-emerged as an available product for financing larger loans. Any loan amount over $662,500 in Sonoma County and as high as $729,750 in higher cost counties are automatically considered Jumbo Loans. Jumbo Loans because of the sheer size of the loan amounts are not as sellable in the secondary market as a conforming loans are so premiums are higher. The market dictated scarcity of these products is also the reason why so few banks offer them.

Historically, Jumbo Loans have not performed as well as conforming loans. This was because the 2004-2007 underwriting criteria for bigger loan was very loose in term of credit e.g. no income, no asset type financing etc. The underwriting criteria for these products has changed to allow for only the best borrower creditworthiness.

Following are some of the must haves for Jumbo Loan financing:

Primary Residence:
-loan amounts to $1.5 million
-up to 80% loan to value
-740 credit score or better required
-maximum debt to income ratio 40%
-18 months of reserves in the bank

Second/Vacation Home:
-loan amounts to $1 million
-up to 65% loan to value
-740 credit score or better required
-maximum debt to income ratio of 40%
-24 months of reserves in the bank

So how to get the best interest rates for Jumbo Loans?

The best answer to this question is to first figure out if we are going with a 30 year fixed or a short-term fixed-rate loan such as a 7 year or 10 year product otherwise known as an arm. The reason we first need to understand this question is because there is a dramatic cost difference between each type of debt structure.

For example a $700,000 loan today on a 30 year fixed rate Jumbo Loan will be around 5% with the cost of approximately 5 points. This will translate to a monthly payment of $3757 per month and discount points in the amount of $35,000. A short term 7 year arm will yield an interest rate of approximately 4.125% with 1.25 and discount points which will translate to $7000 upfront. The monthly payment associated with this interest rate would be $3392.55 per month. So the short term fixed rate product is $365 per month less and $28,000 less on the front end. Since the average Jumbo Loan consumer has an 800 credit score, 40% equity and $500,000 or more in liquidity.

Where to go to get the best rates for Jumbo Loans?

The places to go to get the best rates for Jumbo Loans Sonoma County, CA are independent private mortgage bankers, a local bank or a portfolio lender. Local banks or portfolio lenders’ rates are going to be higher than the rates provided in this post. This is due once again to the scarcity in the Jumbo Loan loan mortgage market. Local banks and portfolio lenders (those being that originate and service their own loans) could potentially be a source for consumers looking for this type of mortgage product. The first place to visit is an independent mortgage bank. This is because independent mortgage banks have individual credit lines which they used to originate loans and sell them in the secondary market and their interest rates will almost always be better. The flexibility of a private mortgage is that they provide the control and efficiency of originating your loan “in-house” as well as the channels to broker your loan if necessary.

So if you are looking for Jumbo Loan in Sonoma County California. Give me a call Scott Sheldon 707 217-4000. I work for the best mortgage company with the lowest interest rates and best terms possible for consumers looking for Jumbo Loans.