Navigating Jumbo Loans in San Francisco

San Francisco is one of the most expensive housing markets in the country, with median home prices over $1.5 million. This means jumbo loans, which are loans above conforming loan limits set by Fannie Mae and Freddie Mac, are common for homebuyers in the city.

What is a Jumbo Loan?

A jumbo loan is a mortgage that exceeds conforming loan limits For a single-family home in San Francisco county, the conforming loan limit for 2023 is $1,089,300 This means loans above $1,089,300 are considered jumbo loans. Jumbo loans typically have stricter eligibility requirements compared to conforming loans.

Jumbo Loan Limits in San Francisco

The baseline jumbo loan limit for most high-cost areas like San Francisco is $1,089,300 for a single-family home in 2023. However, certain counties have higher limits based on local home prices.

For San Francisco county specifically, the jumbo loan limit is $1,089,300 for a single-family home. So any loan over $1,089,300 is considered a jumbo loan.

Jumbo loan limits can also vary depending on the number of units in the home. Here are the 2023 jumbo loan limits for San Francisco county

• 1 unit: $1,089,300
• 2 units: $1,397,400
• 3 units: $1,679,950
• 4 units: $2,172,050

So if you are looking to buy a 2-unit home in San Francisco and need a loan over $1,397,400, you would need a jumbo loan.

Jumbo Loan Requirements

Jumbo loans come with stricter eligibility standards compared to conforming loans. Here are some common jumbo loan requirements:

• Down payment: Expect a down payment of at least 10-20%. Many jumbo lenders want to see 20% down or more.

• Credit score: The minimum is around 700, but scores of 720+ are ideal. The higher your score, the better your chances of approval.

• Debt-to-income ratio: Your DTI is capped at 43% in most cases. Some lenders may allow higher DTIs for certain applicants.

• Cash reserves: Plan to have 9-24 months of mortgage payments in reserve assets after closing. Reserves are a big factor.

• Full documentation: Jumbo loans typically require full income and asset documentation. Stated income loans are rare.

Meeting these standards ensures you look financially qualified for a larger jumbo loan amount. Come prepared with a down payment of 20% or more, strong credit scores, and ample reserves.

Jumbo Loan Rates in San Francisco

Jumbo mortgage rates are typically 0.25% – 0.5% higher than conforming loan rates. This pricing adjustment accounts for the larger loan amounts and risk involved with jumbos.

As of February 2023, average 30-year fixed jumbo rates in San Francisco are around 5.5% – 6.0% with 1 point paid, depending on your exact loan amount and qualifications. Jumbo ARM rates currently start around 4.75% on 5/1 and 7/1 ARM products.

Always compare rates from multiple lenders. Ask lenders if they offer rate discounts for certain credit scores, down payments, or account relationships. Even small rate differences can impact your monthly payment over the long run.

Types of Jumbo Loans in San Francisco

Here are some common jumbo loan programs available in the San Francisco market:

• Conforming jumbo – Jumbo loans that meet Fannie Mae or Freddie Mac requirements except for the loan limit. Easier to qualify for.

• Non-conforming jumbo – Jumbo loans with loan amounts or characteristics that don’t conform to agency guidelines. Typically have stricter requirements.

• Portfolio jumbo – Jumbo loans a lender keeps in their own portfolio instead of selling to investors. Can offer more flexible underwriting.

• ARM jumbo – Jumbo loans with adjustable rates. Popular for their lower initial rates.

• Interest-only jumbo – Pay only interest for the first 5-10 years before principal and interest payments begin. Require 20%+ down.

Talk to a lender about which jumbo loan programs fit your needs based on your down payment, income, assets, and goals.

Tips for Getting Approved for a Jumbo Loan

Getting approved for a jumbo loan in San Francisco’s competitive market requires meticulous preparation. Here are some tips:

• Shop with a loan officer experienced in jumbo lending. They can guide you on qualifying.

• Make a down payment of at least 20% to get the best rates/terms. Larger down payments look better.

• Pay down existing debts and maintain low credit card balances to lower your DTI.

• Have 12-24 months of mortgage payments in your post-closing liquid reserves.

• Get pre-approved to strengthen your offer in San Francisco’s bidding wars.

• Be ready to provide comprehensive documentation on your income, assets, employment, and debts.

• Consider banking and investing with your lender. Existing account relationships can help your chances.

The bottom line is jumbo loans reward borrowers who are financially well-prepared. Take steps to put your best foot forward.

Alternatives to Jumbo Loans

If you don’t qualify for a jumbo loan, here are alternatives to consider:

• Conforming loan – The most feasible option if you can afford a home under $1,089,300. Conforming loans are easier to qualify for.

• Piggyback loan – Combination of a conforming first mortgage with a second piggyback mortgage. Lets you borrow above conforming limits while qualifying under separate guidelines.

• Affordable loan programs – San Francisco has below market rate and down payment assistance programs for eligible buyers. Can make ownership more attainable.

• Investor loan – Leverage rental income if you plan to purchase a multi-unit property and rent out units. Helps offset the mortgage payment.

• Buy with a partner – Co-owning with a partner makes it easier to afford higher priced homes and qualify for larger loans.

Don’t get discouraged if you don’t initially qualify for a jumbo loan. A good loan officer can discuss options tailored to your financial situation.

The Bottom Line

Due to San Francisco’s high prices, jumbo loans are common for local buyers. While jumbos come with tougher standards, they make it possible to buy a more expensive home. Being patient and taking steps to improve your financial profile can go a long way towards getting approved. A knowledgeable loan officer is key to navigating the jumbo market.