Jumbo Loans

GET MORE FOR LESS A jumbo mortgage is a loan that exceeds conventional conforming loan limits, typically in excess of $417,000. *  This number is a limit set by the government regulators, Fannie Mae (FNMA) and Freddie Mac (FHLMC). FNMA and FHLMC are the agencies that purchase the loans from mortgage lenders, thus freeing up funding for the lending agencies to lend more mortgages. Because FNMA and FHLMC do not cover the entire amount of the mortgage if above $417K, this loan type is known as a jumbo mortgage. In the Past...  Historically, jumbo loans were riskier investments for lenders because of the amount of money that was being tied up in a loan, the ability to liquidate expensive property quickly, and the vulnerability of the market. For the aforementioned reasons, jumbo loans carried higher interest rates than conventional loans, until recently. Currently... In recent years, jumbo rates have reached historic lows and at today’s rates, can be lower than conventional loans.  Since Fannie Mae and Freddie Mac do not back jumbo mortgages, there are no additional government regulation fees and the savings are being passed on to homebuyers. No longer does a jumbo loan rate predicate that homebuyers choose a conventional mortgage. In fact, some lending institutions are creating greater incentive for homeowners to get a jumbo loan.  According to the Wall Street Journal, at six big US banks last year, 24% of the mortgages approved were jumbos. Why? Jumbo loan clientele are now considered to be more favorable for diversified lending portfolios. Borrowers of jumbo loans typically have higher credit scores, larger down payments and lower default rates. Once a borrower takes out a low-rate loan, they are often more open to other financial services offered by the lending institution. Additionally, according to MarketWatch statistics, the housing market rebounds more quickly in the upper end of home pricing – all reasons that lending institutions are now incentivizing homebuyers to get jumbo loans. What Does that Mean for You as a Homebuyer? Historically, some homebuyers would use the $417K as a price threshold, and would either increase their down payment or set a lower house price to avoid needing a jumbo loan. This is no longer the case.  If you have a credit score above 700-720 and your Debt-to-Income ratio is less than 43% you may be a candidate for a jumbo loan.  Click here for an example of such savings. Would you like to learn more about your options of either getting a loan or purchasing a home? If so, you have come to the right site. If you are looking for a home in the Steiner Ranch, Four Points area or Austin area we can help. If you are looking for a home loan, Mark Smith can help. *This is the standard number throughout the United States however, there are certain areas of the U.S. that have higher home loan limits.