Every day, we work with small business owners, foreign nationals, real estate investors, and other motivated buyers looking to finance a purchase of luxury Southern California real estate. Whether for your personal use or an income property, buying a high-end property in Southern California often means stepping into jumbo loan territory. These jumbo loans provide the purchasing power for $1M–$5M+ homes, but they come with tighter documentation and underwriting standards. We walk with our clients every step of the way, beginning with tips to avoid common pitfalls like these to keep your purchase on track. Here’s are some common mistakes you need to know about before you get started on applying for loan.
1. Not Organizing Financial Documents Early
Jumbo loans typically require more documentation than conventional mortgages. Our underwriters commonly request two years of tax returns, recent bank and investment statements, business financials (if applicable), and clear documentation of assets and reserves. Waiting until your offer is accepted to gather paperwork and apply for your jumbo loan can slow or jeopardize the investment, so make sure you have your documents in order and have secured pre-approval before you look for the right property.
2. Ignoring Debt-to-Income Ratios
High income alone doesn’t guarantee approval. Ror jumbo loans, we will carefully examine your debt-to-income (DTI) ratio. Multiple open credit lines, existing loans, or personal guarantees can push your DTI over the allowable limit even when your earnings are strong, so if your DTI is nearing 43%, consider adjusting that before you apply.
3. Moving Money Around Before Applying
Large transfers, recent deposits, or last-minute asset shifts create red flags. Our underwriters need to see clear sources of funds for down payments and reserves. With that in mind, keep your accounts stable in the months before applying and be prepared to document the origin of any unusual deposits. As soon as you close, you can move funds around any way you want, but put as much as possible on hold until that point.
4. Underestimating Reserve Requirements
You’ll need to show that you have several months of mortgage payments in liquid reserves—commonly 6–24 months depending on the program and your unique profile. We can talk over the details if you want to get a more definite number that applies to your unique scenario. Buyers who budget only for down payment and closing costs are sometimes surprised by liquidity requirements, so let’s make sure you know what to expect.
5. Not Working with a Jumbo Loan Specialist
Our Jackie Barikhan says, “Not every lender offers non-QM or jumbo programs, and underwriting rules vary. A lender experienced with high-net-worth borrowers, bank-statement programs, and asset-based underwriting can identify the best path quickly and reduce the risk of denial or delay. This is something we specialize in, and our team will be able to answer all of your questions or show you our many client testimonials for your peace of mind.”
6. Making Major Financial Changes Mid-Process
Avoid opening new credit lines, financing vehicles, or making large investments before closing. Even minor credit changes or new debt can jeopardize your eligibility or interest rates during the underwriting process.
7. Assuming All Jumbo Loans Are the Same
Rates, qualifying rules, allowable income documentation, and reserve requirements differ widely between lenders and products. Shopping with a specialist can surface flexible products—bank-statement loans, interest-only options, and asset-depletion programs—that might better match your situation. In other words, you need a team like ours that works with these unique financing solutions every day.
Quick checklist to avoid delays:
- Gather 12–24 months of bank statements, tax returns, and investment statements.
- Verify reserve requirements with your lender early.
- Avoid large account transfers for 60–90 days prior to application.
- Work with a lender who specializes in jumbo and non-QM loans.
