Purchasing a home in Santa Monica, with its breathtaking coastal views and vibrant community, is a dream for many. However, given the area’s high property prices, securing the right mortgage financing can be challenging. For many homebuyers, this means exploring jumbo loan options.
In this guide, we will cover everything you need to know about jumbo loans, including maximize your buying power with low down payment jumbo options while still avoiding PMI.
What is a Jumbo Mortgage in Santa Monica?
A jumbo loan is a type of mortgage used to finance properties that exceed the limits set by the Federal Housing Finance Agency (FHFA). In most parts of the United States, this limit is $806,500 as of 2024.
However, in high-cost areas like LA County, the threshold is even higher. For instance, any mortgage over $1,209,750 in Los Angeles County is considered a jumbo loan. *Please find the chart below for limits on muti-unit 2,3 or 4-plex properties.
Maximum Base Conforming Loan Amount for 2025
| Units | Most of the U.S. | High Cost Locations |
| 1 | $806,500 | $1,209,750 |
| 2 | $1,032,650 | $1,548,975 |
| 3 | $1,248,150 | $1,872,225 |
| 4 | $1,551,250 | $2,326,875 |
Given that the median home price in Santa Monica is around $1,650,000, many homebuyers will require jumbo financing.
Advantages of Jumbo Loans
1. Higher Loan Amounts
One of the primary advantages of jumbo loans is that they allow you to borrow more money than conventional loans. This is particularly beneficial in high-cost areas like Santa Monica, where even modest homes often exceed the conforming loan limit. Qualified homebuyers can secure jumbo loan amounts up to $5,000,000+ depending on their down payment amount.
2. Competitive Interest Rates
Contrary to popular belief, jumbo loans often come with competitive interest rates. While historically these loans had higher rates due to increased risk, today’s market conditions have led many lenders and banks to offer rates that are comparable to those of conventional loans.
3. Flexible Terms and Conditions
Many lenders offer flexible terms for jumbo loans, allowing borrowers to choose from a variety of loan products, such as fixed-rate or adjustable-rate mortgages (ARMs). This flexibility can help you find a loan that fits your financial situation and long-term goals.
4. No Private Mortgage Insurance (PMI)
Unlike conventional loans, jumbo loans typically do not require PMI, even if you make a down payment of less than 20%. This can result in significant savings over the life of the loan.
How to Use Combo Jumbo Loans to Avoid PMI
How to Use Combo Jumbo Loans to Avoid PMIFor homebuyers looking to avoid PMI while still securing jumbo financing, combo jumbo loans can be an excellent solution. A combo jumbo loan, also known as a “piggyback” loan, involves taking out two separate loans simultaneously:
- Primary Mortgage: This is the main loan, which covers the majority of the home’s purchase price.
- Secondary Loan: This is a smaller, second mortgage that covers the remaining amount needed to reach the desired loan-to-value ratio (LTV).
By splitting the financing into two loans, you can often keep the primary mortgage under the conforming loan limit, thereby avoiding PMI. Here’s an example of how it works:
Example Scenario
- Home Purchase Price: $1,500,000
- Desired Loan-to-Value (LTV): 90%
- Primary Mortgage (80%): $1,200,000
- Secondary Loan (10%): $150,000
- Down Payment (10%): $150,000
In this scenario, the primary mortgage remains below the jumbo loan threshold, which means you avoid PMI. The secondary loan covers the remaining 10% needed to reach the desired LTV.
Financing Up to 95% Loan-to-Value (LTV)
Financing Up to 95% Loan-to-Value (LTV)Another advantage of jumbo loans is that some lenders offer financing options for up to 95% LTV in California. This means you can secure a jumbo loan with a down payment as low as 5%. Here are the steps to achieve this:
Step 1: Assess Your Financial Situation
Before applying for a jumbo loan, assess your financial situation to ensure you meet the eligibility criteria. This includes having a strong credit score, a manageable debt-to-income ratio, and cash reserves.
Step 2: Shop Around for Lenders
Not all lenders offer jumbo loans with high LTV ratios, so it’s important to shop around and compare offers from multiple lenders. Look for lenders that specialize in jumbo loans and have a track record of working with high-net-worth individuals. Homebuyers that are ready to explore their options can contact us 7 days a week.
Step 3: Get Pre-Approved
Getting pre-approved for a jumbo loan will give you a clear understanding of how much you can borrow and what your interest rate will be. This will also make you a more attractive buyer when making an offer on a property.
Step 4: Gather Your Documentation
Jumbo loans require more extensive documentation than conventional loans. Be prepared to provide proof of income, tax returns, bank statements, and other financial records. This will help demonstrate your ability to repay the loan. Self-employed buyers do have reduced documentation options with bank statement qualifying options.
Step 5: Close the Loan
Once you’ve found a mortgage company and provided all necessary documentation, the final step is to close the loan. This involves signing the loan agreement, paying closing costs, and transferring ownership of the property.
Jumbo loans are an excellent option for homebuyers in Santa Monica looking to finance high-value properties. With their higher loan amounts, competitive interest rates, and flexible terms, jumbo loans can make your dream home a reality.
By understanding the benefits of jumbo loans, how to avoid PMI with combo jumbo loans even with lower down payments, you can confidently navigate the home-buying process and secure the best financing for your needs.
Ready to take the next step? Book a call today with one of our mortgage experts today to discuss your options and get started on your home-buying journey.
