What Are Jumbo Loans?

  • Matt 'Axe' Axelson
  • 01/22/21

As of 2021, San Diego’s conforming loan limits are: $753,250 for one unit $964,300 for a two-unit $1,165,600 for a three-unit $1,448,600 for a four-unit. 

What’s up guys?! In today's video we’re going to be learning exactly what Jumbo Loans are, at what price point do they kick in, and what are the requirements like the minimum credit score and debt to income ratio to meet that jumbo loan standard. Stick around to the end of the video to find out how YOU can buy a $1.4m, 4-plex for FAR LESS THAN YOU THINK! 

The Federal Housing Finance Agency collects housing market data from across the U.S. and evaluates each region to determine the Housing Price Index, or HPI. From that point, they determine what’s known as conforming loan limits. This year those limits were raised by 6.8%, which is the first time since 2005 where those limits were raised. Naturally, borrower eligibility for jumbo loans are much more strict. 

Typically, homes purchased with a jumbo loan require two appraisals as opposed to just one appraisal with a conventional or FHA loan. A 15%, 20%, or 30% down payment is generally required, with higher down payments receiving lower interest rates. Lenders figure the more a buyer has invested in a property from the start, the less likely they are to end up in foreclosure. The borrower will need a credit score of at least 700 and a debt-to-income ratio of 43% or less is required, plus some cash reserves in the bank. A good sign for the market as a whole is the recent increase in the conforming loan limit reflects the government’s confidence in the market’s health. And in San Diego, job recovery has been stronger than the rest of California and most of the nation as a whole, which also bodes well for continued strength in the housing market. So now for the example I mentioned earlier. Let's say you’re looking to get started investing in real estate and want to eliminate your monthly rent payment. Under an FHA loan type you purchase a 4-unit property for $1.4m for only $49,000 down. 

That’s all you need! You’d live in one unit and rent out the other 3, either eliminating your monthly payment completely or potentially even cash flowing while living for free!! That’s how you can exit the rat race! Have any questions? 

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