With the housing market improving and home prices rising larger homes are becoming hard to get with a standard mortgage. Your Realtor may have mentioned a jumbo home loan, but you aren’t sure what that is.
A jumbo mortgage
Simply put, a jumbo mortgage is a loan to purchase a home that is in an amount that is larger than the limits set by the government. Conventional mortgages have limits as to how much it can be.
This is because mortgages are commonly bought and sold on secondary markets, and are backed by FNMA (Fannie Mae) and FHLMC (Freddie Mac). If a mortgage is over those limits, Fannie Mae or Freddie Mac will step in and back the mortgage. The current limit is $453,100, with a few exceptions as to locations where it could be higher.
Conventional formats
Most mortgage companies offer jumbo loans in the conventional formats like fixed rate or interest only loans, and these have LTV or loan-to-value limits too. Jumbo loans typically have an 80% or 90% loan-to-value limit on the loans.
This is because they need to be sure the risk is minimized as much as possible since there is no federal backing. They usually carry a higher interest rate; usually .25% to .50% higher than that of a conventional loan.
They aren’t impossible to get, and with the easing of restrictions as the market grows. And if you need that bigger home, the risk may be worth the reward.
Finding a great lender
When you get up into the Jumbo loan prices, having a qualified lender becomes even more important. If your lender is used to working within the framework of FHA loans, they may not have the resources to find you the best Jumbo loan to fit your needs.
Additionally, you may be looking at putting down a significant amount of cash or even using some private money in addition to the loan and as such your lender needs to know how to get that kind of complicated loan to the closing table.
Many of the properties we sell here in Tampa Bay fall into this Jumbo loan category and we have a list of lenders who we feel do a great job with our clients. Please contact us if you would like a great referral or to talk about purchasing a Jumbo loan property today!