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Jumbo Loans

Jumbo loans refer to mortgages of a certain dollar amount.  Today’s current maximum conventional mortgage amount is $417,000.  This means that any mortgage loan above $417,000 is a Jumbo loan.  A Jumbo loan will typically have a slightly higher interest rate than conventional loans.

The interest rate is higher due to one factor; risk.  Since the loan is so much bigger than typical loans, there is a greater chance that the loan will not be repaid.  For this reason the rates are higher to accommodate this risk.

Jumbo loans are offered with different terms such as 30 year and 15 year fixed rates as well as adjustable rates with a short fixed term such as 1, 3, 5 or 7 years.  The adjustable rate loans usually offer a much better interest rate than the fixed rate loans.

Jumbo Purchase

Buying a home with a mortgage greater than $417,000 will require at least a 15% down payment.  This means that anyone looking to purchase a home priced at $521,250 or higher will need to pay at least a 15% down payment.  However, due to the large down payment there is no requirement for PMI.

Jumbo Refinance

Refinancing a jumbo mortgage is similar to refinancing a conventional or government loan.  However, some of the costs associated with refinancing are calculated on the loan amount.  Therefore, it is wise to speak to a mortgage banker with experience dealing in jumbo mortgages in order to determine if the overall cost of refinancing is beneficial in the long run.  Just like a purchase, a jumbo loan can be refinanced up to 85% of the home’s value.  This can be done to take advantage of better rates, switch from an adjustable rate to a fixed rate, or convert to a different term.

Jumbo Cash Out Refinance

A cash out refinance Jumbo mortgage allows homeowners to use the equity in their home to pay off other debts.  Homeowners can also combine a first mortgage with an existing second mortgage in order to have one monthly payment.

 

 

 

Related Blog Posts:

  • With a Jumbo Mortgage, the Devil Is In the Details
    For loans above the limit of $417,000 there is some good news. Many lenders are finding it easier to get these loans processed and approved. More importantly, the huge interest rate discrepancy between conforming loan amounts and jumbo loan amounts has eased up. Right now the jumbo loans are being offered approximately at a rate 0.50% higher than conforming mortgages. In order to get approved for one of these loans, borrowers need to be aware of the fine details that will be scrutinized.
  • 15 Year Jumbo Loan Is Good Way to Build Equity
    Jumbo loans, by their very definition, are larger than typical mortgages. Home loans that are in the $500,000 and higher range are usually reserved for a different type of borrower. These people usually have incomes that dwarf a typical consumer and therefore they handle their money differently. Recent data suggests that they may be bucking conventional wisdom and going with shorter terms.
  • Understanding Jumbo loans
    Mortgage products seem to have an endless supply of names. There are conventional, FHA, VA, USDA, non-conforming, private financing and on and on. One type of mortgage that gets extra attention from lenders is the jumbo mortgage.
  • Special Considerations for Jumbo Mortgages
    People have different ideas when they hear the term “Jumbo” mortgage. Some people feel that they are not like conventional mortgages while other people think the term is simply a marketing ploy. Truth be told, a jumbo mortgage is extremely similar to most conventional loans offered by the majority of lenders across the country. The primary difference is the actual amount of the loan. The current maximum loan amount for a traditional loan is $417,000. Any mortgage higher than this ceiling is considered a jumbo loan.