What is a Jumbo Loan

by Vic Bassey

A jumbo loan, also referred to as a non-conforming loan, is either a residential or commercial loan that does not follow guidelines that have been set by Fannie Mae or Freddie Mac. This loan exceeds both guidelines and limit Fannie Mae and Freddie Mac requires for loans to be purchased from a mortgage originator and are simply too large to be bought, packaged and sold.

Qualifications for a jumbo loan

1. Credit. A credit score of at least 680 is needed for a jumbo loan. Applying for a jumbo loan should be delayed if an individual does not have this credit score.
2. Down payment. A down payment is determined upon where the property is located. Most markets where prices of homes are declining require 20% down. In other areas, 5% may be accepted. Financing without a down payment is typically not available with jumbo loans.
3. Assets and liabilities. An applicant’s loan amount may be larger with a jumbo loan but should not be higher than what he or she can afford. What is most important is how many accounts an individual has and how likely it is that he or she may open more accounts.

Jumbo loan interest rates

Typically, a jumbo loan is offered with an interest rate that is 1-2% higher than a conforming loan. A higher jumbo loan amount results in a higher interest rate. Other factors that affect the interest rate include the borrower’s creditworthiness, financial status and debt-to-income ratio. A higher rate for larger loans accounts for the greater risk that is involved with the loan. The small jumbo loan market for homes can explain why lenders charge higher interest rates.

Jumbo Refinance Interest Only

A popular option for borrowers who have fluctuating incomes or who expect to live in the home for only a few years is a jumbo refinance with interest only. For a certain period of time, the borrower pays only the interest on the loan, which can substantially reduce monthly payments. Then, at a pre-determined time, the refinanced loan payments increase and count toward both principal and interest. The main advantage of a jumbo refinance interest only is that beginning payments are smaller, so cash can be used for other purposes. The downsides are that no equity is being built in the home while interest-only payments are made and the significant increase in payments can cause financial distress for homeowners.

Lenders typically offer several loan terms and options in an attempt to gain business. Borrowers must understand the impact of finalizing a jumbo loan refinance, especially when dealing with a jumbo refinance interest only or high jumbo refinance rates. Borrowers must be willing to shop around, compare jumbo refinance mortgage rates, and choose a program that will leave them in a better financial position than where they started.

Super jumbo loans

Super jumbo loans, as classified in the US, are mortgage on residential properties or other loans covering home-security, provided the amount involved is above a particular prescribed value. This amount may differ from one moneylender to another, respective of their own internal investment criteria. The customary practice is that every year in the US, FNMA (Fannie Mae) and FHLMC (Freddie Mac), two major government affiliated agencies governing the mortgage scenario, decide the value for the end point of a normal loan and the beginning point of a jumbo loan. Super jumbo refinance mortgage rates do not confine to the rules set forth by “Fannie Mae” and “Freddie Mac” and are hence referred to as non-confirming loan at times. Though these loans are convenient and easily available, they even charge a slightly rate of interest compared to the normal loan case. Moreover, the dollar that forms the basic structure of the jumbo mortgage system changes every year and so does the loan’s interest.

Super jumbo refinance mortgage rates

Mortgages come in different varieties. Some of them include Federal Housing Administration, VA, Adjustable Rate Mortgage, Fixed Rate, Hybrid, Option, Cash Flow, Convertible, Two Step, Rural Housing, Graduated Payment etc. and so on. It is close to impossible to have an in depth idea about all the mortgage rates at the same time. But, at the same time, the humungous difference in the pattern of the loans gives the borrowers an unexpected advantage. While going through the procedure of purchasing high price home, one should keep in consideration the tax advantages that come handy with the super jumbo refinance mortgage rates. One is expected to pay the 20 percent of the amount involved as down-payment for the best super jumbo refinance mortgage rates. The guidelines for different varieties of mortgages vary accordingly and the borrower should look out for what suits him the best.

Super jumbo loans and Multiple Appraisals

With super jumbo refinance mortgage rates, the borrowers have the option of paying the least amount possible for down-payment, and in some cases no payment at all. The typical lowest super jumbo refinance mortgage rates maximum vary from 80% to as low as 50% depending on the amount involved. The difficulties involved in setting the exact market values for house plan make it customary for the jumbo mortgage plans to require full 2 appraisals at the minimum. In case of unique properties that may not be easily available for reviewing of comparable sales value, additional field review appraisals, desk review appraisals and other broker options are necessary to substantiate the property’s value.

Advantages of super jumbo refinance mortgage rates

Despite the general overall notion about the jumbo mortgage system, the plan works quite effectively to benefit the borrowers in more than a single way. The very basic and most beneficiary thing about the super jumbo mortgage plans is that it takes the principle loan amount to an entirely higher level than the normal, thus allowing the borrowers to purchase expensive and luxurious homes that they wouldn’t even dream of. Another distinct advantage of these loans is that one does not have to bother himself with different organizations for multiple mortgages. Unlike the traditional loan system, working with a single lending institution makes financing smooth, effortless and hassle free.

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