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in San Luis Obispo, CA
San Luis Obispo buyers face an important choice when financing their home purchase. Conventional loans work well for properties within standard price ranges, while jumbo loans handle higher-value homes that exceed conforming limits.
The right loan type depends on your purchase price, down payment, and financial profile. Understanding how these mortgages differ helps you choose the most cost-effective financing option for your situation.
Conventional loans follow guidelines set by Fannie Mae and Freddie Mac. These mortgages finance properties within conforming loan limits, which vary by county but typically cap around $766,550 in most California markets.
You can put down as little as 3% on a conventional loan, though 20% avoids private mortgage insurance. Credit score requirements usually start at 620, with better rates available for scores above 740.
These loans offer predictable terms and competitive pricing. Lenders can sell conventional mortgages to investors easily, which often translates to lower rates for qualified borrowers.
Jumbo loans finance properties above conforming loan limits. In San Luis Obispo County, any mortgage exceeding the local conforming limit requires jumbo financing with its own set of requirements.
These mortgages typically demand larger down payments, often 10% to 20% minimum. Lenders want credit scores of 700 or higher, with many preferring 740+ for the best terms.
Jumbo loans carry more risk for lenders since they cannot be sold to Fannie Mae or Freddie Mac. This affects pricing and underwriting standards, making qualification more stringent than conventional financing.
The loan limit serves as the primary dividing line between these products. Conventional loans cap at conforming limits, while jumbo loans start where conventional loans stop.
Down payment requirements differ significantly. Conventional loans allow as little as 3% down, while jumbo loans typically require 10% minimum, often more for optimal pricing.
Credit standards separate these options too. You can qualify for conventional financing with a 620 score, but jumbo lenders prefer 700 or higher. Rates vary by borrower profile and market conditions, though jumbo rates sometimes match or beat conventional rates for well-qualified buyers.
Reserve requirements matter more with jumbo loans. Lenders often want to see 6-12 months of mortgage payments in savings, while conventional loans may require less depending on your down payment.
Your purchase price determines which loan type you need. If your San Luis Obispo home falls within conforming limits, conventional financing offers easier qualification and more flexibility.
For higher-priced properties, jumbo loans provide the necessary financing power. You will need stronger credit, a larger down payment, and substantial cash reserves to qualify.
Consider your long-term financial picture. Conventional loans with PMI might cost more monthly than a jumbo loan with 20% down, depending on rates and your credit profile. Compare total costs, not just the loan type.
Conforming loan limits vary by county and change annually. Contact SRK Capital for current limits in San Luis Obispo County to determine whether you need conventional or jumbo financing.
Yes, some lenders offer jumbo loans with 10% down. However, larger down payments typically secure better rates and terms. Your credit score and financial reserves also impact approval.
Not always. Rates vary by borrower profile and market conditions. Well-qualified jumbo borrowers sometimes receive rates comparable to or better than conventional loan rates.
Yes, putting 20% or more down eliminates private mortgage insurance on conventional loans. Some lenders also offer lender-paid PMI options with slightly higher rates.
Most jumbo lenders want 6-12 months of mortgage payments in liquid reserves after closing. Requirements vary by loan amount, down payment, and credit profile.