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Jumbo Mortgage: Way to financing/refinancing a bigger home

If you're into buying a bigger home or refinancing to pull out lump sum cash, then jumbo mortgages may be just what you need. Until the changes made to the Freddie Mac and Fannie Mae guidelines in 2008, a mortgage exceeding $417,000 on single family home was known as Jumbo loan or Non-conforming. But as per the Economic Stimulus Bill signed February 13, 2008, the conforming loan limit has been extended to $729,750 for high cost areas only till the end of 2008. Investors like Freddie Mac and Fannie Mae will therefore purchase loans (originated between July 1, 2007 and December 31, 2008) up to $729,750 till December 31, 2008. However, the limits are even higher in Alaska, Hawaii, and other areas depending upon the government estimates of home prices in such areas. How do I qualify for Jumbo Loans? Check out 3 factors prior to going for a bigger loan: Your credit standing A FICO score of 680 is the minimum you should have, though most lenders look out for scores above 700 for jumbo loans. If you don't have such a score, better wait till it improves or else you may not get a good rate and end up in mortgage problems. Here are a few credit tips to help you qualify: Pay down revolving debt, if any and try to improve your score by 5-12 points within 3 months if your score is somewhat close to 680-700. Try to reduce the balance by 50% on credit cards which you've maxed out. Avoid opening new lines of credit. Close unused credit cards which you've been handling since a long time. Resolve medical collections and late payment issues or else these can hurt your score. For additional credit tips, refer to the credit repair section. The purpose is to have a clean credit report before you apply for the loan. How much to put down The down payment depends upon where you're buying the property. Most markets would require you to put down 20% of the purchase price especially in markets where home prices are on a decline. For other areas, a 5% down payment can be accepted. Usually no down payment options are unavailable as jumbo loans. Your assets and liability You may qualify for a bigger loan but its better not to go for a loan amount higher than you can afford. So, make a list of your assets and liabilities and check out How much you can afford. Apart from your assets, what matters is, how many accounts you have at the bank and how many you are likely to open for business purpose or personal considerations. How's the interest rate? Usually jumbo loans are available at 1-2% higher rate than that of conforming loans. The higher your jumbo loan amount, the higher is the rate offered. Other factors affecting the borrower's rate are his financial situation, creditworthiness and debt-to-income ratio. The higher rates for bigger loans account for the greater risk involved. That's because once a borrower defaults, he'll not find it easy selling his home and paying off the loan. Neither will the lender be able to sell off through foreclosure or deed-in-lieu and recover the proceeds. The reason is, there's only a small market for homes secured by jumbo loans; hence this translates into higher interest rates charged by lenders. How can I make jumbo loans more affordable for me? Here are 3 tips to help you structure the loan such that you can afford it. Conforming and second mortgages: Lenders often provide jumbo loans as a combination of 2 loans –conforming loan and second mortgage. The first being a conforming loan, will fetch you a lower rate than the jumbo. The second, usually a Heloc, will have higher rate; the lesser the second loan amount, the lower will be the blended or effective rate of the two mortgages. To find out whether you should take out jumbo loan or a combination of conforming and second mortgage, you need to determine monthly payment on both the offers and as well as the total interest paid for each. Then compare the costs including total interest paid on each of the loans and then take the final decision. However, if you have higher income, you may even think of paying off the second faster using your bonus. Bigger down payment: If you have a good credit history (with a score of around 720) and can put down more than 20%, you have a fair chance of getting a lower rate on a conventional jumbo loan. For FHA loans, off-course the down payment is far lower. Pay points for a low rate: If you're staying in the house for more than 4-5 years, it's worth paying points to lower the rate on your jumbo loan. If you have good credit and your income is high enough, you'll be better off with a jumbo loan. But be prepared for the strict underwriting requirements, often more than one appraisal, detailed inquiry about your finances, income and debt and other factors which affect your ability to pay off the bigger loan.

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Carol

Guest

0.10 Dollars($)

Post subject: Conforming loan limits

What is the limit for Conforming, I forget?

adonis
adonis

Joined: 22 Oct 2005
Posts: 4417
Location: ALASKA

208.06 Dollars($)

Post subject: RE

As announced on November 30, 2004, the "conforming" loan limits for 2005 are: One-family: $359,650 (up from $333,700) Two-family: $460,400 (up from $427,150) Three-family: $556,500 (up from $516,300) Four-family: $691,600 (up from $641,650) These limits are effective for loans closed on or after January 1, 2005. The maximum loan amounts for one-to-four family mortgages in Alaska, Hawaii and the U.S. Vir gin Islands are 50% higher than the limits for the rest of the country. Hope this will sufice your needs. Adonis

ckalvesmaki

Community Experts

Joined: 28 Jan 2006
Posts: 378
Location: Dallas

56.65 Dollars($)

Post subject:

The cut and paste from above is a year old here is the info for 2006 Single-Family Mortgage Loan Limits effective January 1, 2006: First mortgages One-family loans: $417,000 Two-family loans: $533,850 Three-family loans: $645,300 Four-family loans: $801,950 Note: One- to four- family mortgages in Alaska, Hawaii, Guam, and the U.S. Virgin Islands are 50 percent higher than the limits for the rest of the country. _________________ Cedric Kalvesmaki *Professional Disclaimer* While I am a Mortgage Professional, this advice is generic in nature only. 888-383-9019 emails and PMs gladly answered www.freedommortgagetexas.com Freedom Mortgage I live in TX but cover all 50 states

taira

Guest

0.10 Dollars($)

Post subject: jumbo loan possible?? what can be the rates?

I have relocated to an area where housing is costlier than where come from. My husband and I are I are looking for a $650,000 home with down payment of 15%. Fico score of my husband is TU 680, Ex 700 and Eq 755. our combined gross income is $2,00,000. I have paid collections, no credit card balance. But I have a personal loan for which I'm paying $670 per month. Can I qualify for jumbo loan considering the credit crisis? What can be the rates offered?

larry

Joined: 27 Jun 2007
Posts: 3328

474.61 Dollars($)

Post subject:

Hi taira, Welcome to the forum. Your credit score is good and also you have good income. So I think you can surely get a Jumbo loan. You need to shop a bit for lenders. You can even request for no-obligation free mortgage quote from the rated lenders of the community. You need to give just minimum details. Hope you will enjoy participating in this forum. Best of luck, Larry

helping_user

Joined: 31 Mar 2006
Posts: 815
Location: Hawaii

155.15 Dollars($)

Post subject: RE: get jumbo loan during credit crisis

Hi Taira, Your credit scores are impressive and so is your income. The fact that there are no credit card balances or you have paid collections will hopefully work in your favor when it comes to qualifying. Also, a 15% down payment is good enough to qualify. Jumbo loan rates on both fixed rate and adjustable rate loans have dropped down by a few points, so you can try out for them. And with the limit having increased especially in high costs areas, you'll get a chance to get a bigger home too. Thanks.