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Guide to Getting a Jumbo Loan


What is a jumbo loan and what do you need to know if you find yourself in a position of needing one?

A jumbo loan is a loan that is larger than your average mortgage loan. Specifically, it is a mortgage loan that is more than $417,000. In addition, a jumbo loan usually has an interest rate that is one percentage point higher than the interest rate of a conventional loan.

If you find yourself in need of a jumbo loan because you are buying a pricey house, you should be aware of the fact that it is not as easy today to obtain a jumbo loan as it once was. The primary reason for this is that lending restrictions and credit restrictions have tightened. Lenders are simply more wary about loan out larger amounts of money and even warier about adding properties to their balance sheets that could ultimately turn out to be high risk. That does not mean that it is impossible to obtain a jumbo mortgage, but it does mean that you need to educate yourself about the process.

First, make sure that you have taken the time to understand your options when it comes to getting a mortgage. Right now lenders simply do not have a lot of incentive for making jumbo loans. If you are going to entice them into making a jumbo loan, you need to put some incentive on the table. One way to do that is to make the largest down payment possible. You will have a much higher chance of being approved for a jumbo loan if you put down in excess of 20% on the loan. This will help to reduce the amount of risk that the lender is taking in approving the loan, which may be just enough to convince him to approve it.

Using a mortgage broker can also help by expanding your horizons in terms of finding those lenders who are willing to consider accepting a jumbo loan. You certainly do not have to work with a mortgage broker, but you will reduce your chances of exhausting all options.

When considering a jumbo loan, you must also recognize that you will usually need to pay a higher interest rate. This is because jumbo loans cannot typically be sold in the secondary market to lenders such as Freddie Mac and Fannie Mae. As a result, lenders tend to stick jumbo loans with higher interest rates. This makes shopping around for the best possible deal even more important. While it may take more time, ultimately it will definitely be worth it. Even finding a mortgage loan with an interest rate that is a fraction of a point smaller can make a big difference on a mortgage payment for a jumbo loan.

Remember that when you are applying for a jumbo mortgage loan, you are already at a disadvantage. Do not give the lender any other reason to reject your application. Before you submit it, take the time to review it and be certain that everything is accurate and completely filled out. Along those same lines, it is a good idea to make sure that you have been pre-approved and pre-qualified for a jumbo loan before you ever actually start shopping around for a house.

Take a look at your own credit score and history to be certain there is nothing on your credit report that could potentially interfere with your ability to be approved. Lenders are looking for exceptionally high credit scores today and that is especially true when it comes to jumbo mortgages. Avoid making any large purchases on credit just before or just after applying for a jumbo mortgage, as this may cause you some problems when it comes time to have your mortgage application approved.

Take the time to make sure you know how much you are going to owe in closing costs. Do not fall into the trap of accepting a mortgage from a lender who appears to be offering a lower interest rate but who is making up for the difference and then some when it comes to closing costs and fees. Protect your best interests by staying informed of the going rate for closing costs and questioning anything that appears to be too high.

Finally, keep in mind that while it may be more difficult today to be approved for a jumbo loan than it was a couple of years ago, that does not mean that it is impossible. With some knowledge and tenacity, you can find a lender who will be willing to work with you. You may want to consider Quicken Loans® Jumbo Loan


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