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in Escalon, CA
Escalon sits in a market where conventional loan limits sometimes fall short of actual property values. Understanding when you need a jumbo loan matters because it affects your rate, requirements, and monthly payment.
The dividing line is simple: conventional loans max out at the conforming limit, jumbo loans start where that limit ends. Your loan choice depends on both purchase price and how much cash you bring to closing.
Conventional loans follow Fannie Mae and Freddie Mac guidelines. They cap at the conforming limit, which for most of California is higher than the national baseline but still restrictive for pricier properties.
You can put down as little as 3% with PMI, or 20% to avoid it. Credit minimums start at 620 for most lenders, though better rates require 740+. These loans work for primary homes, second homes, and investment properties.
Conventional financing offers the most competitive rates when you qualify. Lenders see less risk because Fannie and Freddie buy these loans, creating deep liquidity in the secondary market.
Jumbo loans exceed conforming limits and carry more lender risk. That risk translates to stricter underwriting: expect 700+ credit minimums and often 10-20% down payments depending on the property price.
Cash reserves matter more here. Most jumbo lenders want 6-12 months of mortgage payments sitting in your account after closing. Debt-to-income ratios get scrutinized harder, and full income documentation is standard.
Jumbo rates sometimes match or beat conventional rates, but that changes fast based on market conditions. The difference often comes down to your borrower profile more than the loan type itself.
The conforming limit acts as the bright line between these loans. In most California counties, that's $806,500 for 2024. Buy a $750,000 home and you're in conventional territory. Buy an $850,000 home and you need jumbo financing.
Credit standards differ by about 80 points in practice. A 640 score might squeeze into conventional approval but gets denied for jumbo. Down payment flexibility also narrows: jumbo lenders rarely go below 10%, while conventional allows 3%.
PMI works differently too. Conventional loans use removable mortgage insurance. Jumbo loans either charge higher rates or use lender-paid MI baked into pricing. You don't get the same clear path to dropping coverage.
Start with your purchase price. If you're buying under the conforming limit and have decent credit, conventional wins on flexibility and cost. You'll face easier qualification and better options for low down payments.
Jumbo makes sense only when your purchase price forces it or when your borrower profile is strong enough that rates compete. Some buyers with excellent credit and large down payments actually get better jumbo rates than conventional.
Your broker should run both scenarios if you're near the conforming limit. Sometimes putting more down to stay conventional saves money versus going jumbo. Other times the jumbo rate advantage outweighs the stricter requirements.
San Joaquin County follows the baseline conforming limit. For 2024, that's $806,500 for single-family homes. Anything above requires jumbo financing.
Jumbo lenders structure MI differently than conventional loans. Some offer lender-paid options built into your rate, but standalone removable PMI isn't standard.
Not always. Borrowers with excellent credit and large down payments sometimes get competitive jumbo rates. Rates vary by borrower profile and market conditions.
Expect 6-12 months of mortgage payments in liquid assets after closing. Higher loan amounts and lower credit scores push that requirement toward the upper end.
Yes, but expect stricter requirements. Most jumbo lenders want 20-25% down for investment properties and higher credit scores than primary residence loans.