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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