Everybody dreams of living in a beautiful house in a wonderful neighborhood. But how are you going to do that unless you are rich? Well, let us introduce to you – jumbo loans. When it comes to higher-priced homes, the traditional loans may not be enough for you to finance the home you wish to purchase. As such, there are loans called jumbo mortgages which play by rules that are different than what most people are accustomed to regarding house loans.
Mortgages for expensive houses are not that standardized. To purchase one, you might have to loan an amount that is way bigger than the jumbo loan limit Texas set by Fannie Mae or Freddie Mac.
What is a Jumbo Mortgage?
For financing expensive properties, you might need a jumbo mortgage since conforming home loans that meet the limits set by Fannie Mae or Freddie Mac only reach the amount of $453,100. If your loan exceeds at least $1 of this amount, you need a non-conforming loan such as jumbo loans.
Sometimes known as a jumbo mortgage, a jumbo loan is one that plays by its rules.
Also read: Top 4 Benefits Of Jumbo Mortgages
Financing Your House
Years ago during the mortgage crisis, most jumbo loans went away and the only ones remaining had guidelines that most homeowners had a hard time meeting.
These loans required high-interest rates, high down payments and high credit standards. Because of this, jumbo loans almost became obsolete. Bust when the market slowly recovered, jumbo loans came back. A lot of home buyers nowadays might even be surprised to learn that the rates of jumbo loans are almost as low as the conforming rates.
Jumbo Loans Vs. Conforming Loans
Jumbo mortgages usually have a higher interest rate compared to the conforming loans. What’s popular among borrowers of these kinds of loans are adjustable rates instead of the fixed ones. The rates for jumbo loans usually vary for each lender unlike the rates for standard mortgages.
To keep your mortgage below the limits of conforming loans, you might want to consider piggyback mortgages. What are these? These are pretty much the combination of two different mortgages.
Rates for jumbo and conforming rates almost ranged around half a point to as big as two points. However, it is essential to know that the spread between conforming and jumbo rates is already minimal. According to a national survey, it is at approximately 1/10th of a percent.
Unlike conforming loan rates, the difference between every lender is only about 0.25 to 0.5 percent, but for jumbo rates, the variation is large between every lender so make sure you choose wisely.
Pick at least three or five lenders and interview each one of them before you make your decision. When conforming rates are bigger, it doesn’t mean that the rates for jumbo loans will also go up.
Take some time to shop and compare. Unlike other types of loans, a 0.5% difference in a jumbo loan interest rate on a $600,000 mortgage can add up as time goes by so be very careful.