Finding and Financing Your San Diego Luxury Home

Dr. Deena Stacer
Published on November 27, 2017

Finding and Financing Your San Diego Luxury Home

Finding Your San Diego Luxury home

When looking for your own San Diego Luxury home, you will want to determine the areas in San Diego where you want to live. You will want to determine the price of your home you are willing to spend and determine the most important features you want in your home. Since everything concerning real estate depends on specific neighborhoods, you will want to know which areas offer the luxury homes you are most interested in.

Financing Your San Diego Luxury home

Your San Diego luxury home purchase may be a little different than buying a smaller or less expensive home. The process may require more interactions between your lender, escrow, and you. You most likely will be financing  a portion of your luxury home with what lenders call a jumbo loan.

When you finance your San Diego luxury home you will need to get approval for a Jumbo loan. You’ll need to start the loan process before you put in an offer on a home you like. You will need to get approval for a Jumbo loan. You’ll need to start the loan process before you put in an offer on a home you like. You will want to meet with a lender who has done Jumbo loans and knows what documentation you will need to provide to the lender to get a preapproval for your loan.

A preapproval is not a guarantee you qualify for the loan, it is a letter from a lender that states that they believe you qualify for the loan based upon the documentation you have provided to them. You will then need to complete the loan application, and the lender will submit the loan paperwork to underwriting to determine all of the documents you need to provide to them in order to get loan approval.  This process requires that you have a specific home you have an accepted offer for that the lender will help you purchase.  The best way to guarantee that you really qualify for a loan, is to make sure your lender gets enough documentation from you, including credit reports, including income and assets, to make sure you are qualified for the home loan you will need for the San Diego Luxury home you want to buy. They will also tell you how much loan and home much money you will need to have to purchase the home. Once you know this information, you can them begin your search for the right home.

What’s a jumbo loan?

A jumbo loan, also known as a non-conforming loan is the type of loan you will need in order to purchase a property that is priced higher than Fannie Mae’s and Freddie Mac’s conforming loan limits. The conforming loan limit for a single-family San Diego luxury home in 2017 is currently $612,950. For example, you may have found a home that is priced in the 1 million dollar range. You will need a jumbo loan if you are financing more than 612, 950 of the home loan.

Qualifying for a jumbo loan for your San Diego Luxury Home

Jumbo mortgages require the same type of loan application and documentation as a conforming loan. Lenders look at your down payment, your monthly debt to income ratio and your credit score.  Your requirement for credit score is the same as a conforming loan too. If you have a credit score of 680 or more, you will be able to have choices about the loan options for financing. A higher credit score of 780 or more means that  you get a lower interest on your loan.

Lenders look at the money you have left over after the loan closes, which they call “reserves,” and some lenders may be more stringent than others on the amount of reserves you must have to qualify for the loan. Often, jumbo lenders want to see 12 months of reserves after the close of escrow,  half liquid (in a checking or savings account), and half calculated from your retirement assets. Conforming loan reserves may requirement you to have up to 12 months of money in your account, depending on factors such as your credit score, down payment, and your debt to income ratio.  Jumbo loan exceptions are also available whenyour debt-to-income ratio is low and your down payment amount is high.

Jumbo loan approvals have some additional flexibility that conforming loans don’t have:

  • Higher debt-to-income ratio. For most conforming loans with 20 percent down or more, lenders usually require that your total monthly housing payment, plus all other monthly bills doesn’t exceed 43 percent of your income. There can be some flexibility on non-conforming loans, for example, if you documented substantial cash reserves left over after the loan closed, you might be able to get a jumbo loan with a debt-to-income ratio higher than 43 percent.
  • Flexible income calculations. Jumbo income calculations can be more logical than conforming. For example, if you were in the same industry for 15 years and recently started your own business in that industry, a conforming loan would require you to show two years of filed self-employed tax returns. A jumbo loan might only require one year of filed returns if you could document that the business was stable or growing.
  • Less than 20 percent down helps eliminate mortgage insurance. Down payments on jumbo loans can be as little as 10 percent for loan amounts of $1 million and sometimes higher, translating into a $1.1 million purchase price or higher. Unlike conforming loans, these low-down jumbo programs don’t always require mortgage insurance. The tradeoff for this flexibility is that most lenders will offer a rate that’s about .25 percent higher and require 30- to 36-percent debt-to-income ratios for these low-down jumbos.

Generally, a 10 percent down payment is required, although borrowers with high credit scores can find mortgages with a 5 percent down payment requirement. The good news is that, in their pursuit of wealthy clients, some lenders are willing to waive the private mortgage insurance (PMI) requirement on these low-down payment loans.

Like all loans, you will need to prove that you can make the monthly payment

This means you must have:

  • A stable employment history – at least two years with your current employer or two years of tax returns to prove self-employment.
  • An explanation of what you do for a living if its “value” isn’t as obvious as, for example, a physician or CEO.
  • Proof of your income – Lenders want to see not only pay stubs, but bank statements as well (even the blank pages, believe it or not).
  • Proof of your down payment funds.

In a nutshell, you will need to be able to document your assets, show a high credit score (the average score for the jumbo loan in the first quarter of 2017 was 771) and show proof of a responsible credit history.

Jumbo loan expenses

As of the first quarter of 2017, jumbo loans were actually cheaper (by 21 basis points) in the long run than conforming loans, according to a report released by Core Logic.  In August of this year, for instance, interest rates on these loans tumbled to where they were “13 basis points lower than the conforming rate, the largest spread between the two since March 2016,” according to CNBC’s Diana Olick.

Be prepared for closing your loan on your San Diego Luxury Home. 

There are additional steps in the qualifying process, and jumbo loans tend to carry higher closing costs. An example of an extra step is a lender who may require two appraisals of the property.  Right now, some lenders are waiving the PMI (private mortgage insurance) requirements with a low-down payment for a jumbo loan, and they may allow borrowers with lower credit scores to get Jumbo loans if the other criteria they must meet falls into the requirement for a jumbo loan.

Where to find your San Diego Luxury home

San Diego has a wide variety of neighborhoods.  The closer you get to the coastline, the more homes cost. Homes in San Diego range from tract subdivisions to custom build view homes.  Luxury homes can be found all over the county. You will want to find out first the loan amount you qualify for so you can then begin your neighborhood and city search.  You will have specific features in mind that you want in your San Diego Luxury home.  You may want to have a view home, a gated community, at least a 3 car garage. You may want an open floor plan with room to entertain, outdoor living space with a pool.  And you may want all of these items plus more. If you already are in the real estate market, and your have equity in your home, you may find that you will be able to upgrade to a home that features all of these benefits.  If you don’t know where to begin your search, you can feel free to contact me to help you find the right lender, and discuss your real estate goals.

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Need help finding your San Diego Luxury Home?

If you’re interested in pursuing a San Diego Luxury home and you need a jumbo loan, feel free to contact me and I will introduce you to lenders who specialize in luxury home purchases and obtaining a jumbo loan.

Dr. Deena Stacer
[email protected]
858-229-8072

Realty One Group
CA-BRE 00703471

The Doctor That Makes House Calls!
SanDiegoSearchForHomes.com
DrDeenaRealtor.com

 

 

 

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