Jumbo Mortgage Loan – The Basic
You may have heard of the term jumbo mortgage loan and wondered what it means. This short article will take you through the meaning and steps you need to do once you start your home loan process. It is important for you to understand this to anticipated problems with your mortgage loan.
What Is Jumbo Mortgage Loan?
In basic terms, if a home loan for property in the continental United States exceeds a certain limit for conforming home loans, it is considered a jumbo mortgage loan, whether the funds are used to purchase a new home or to refinance an existing mortgage. This limit for conforming loans is determined by Freddie Mae and Fannie Mac, government sponsored entities that are the two largest players in the secondary home loan market in the United States. Therefore, jumbo loans are sometimes referred to as non-conforming loans.
Currently (as of 2010), a jumbo mortgage loan is a loan more than $417,000. This conforming loan limits typically changes each year, but general conforming loan limits for 2006 to 2010 are identical. For residents of Alaska, Hawaii, Guam, and the U.S. Virgin Islands, mortgages are not considered to be jumbo loans until they exceed $625,000. Source : http://www.fanniemae.com/aboutfm/loanlimits.jhtml
The approval process of jumbo mortgage loan is the same for conventional loans for most lenders. However, not all lenders offer jumbo mortgage loans. So, if you are planning to apply for a jumbo mortgage loan, it is important to disclose your intent to your loan officer in advance.
Unfortunately, the interest rate for a jumbo mortgage loan is typically 1/4% higher than a conventional loan but this does vary and the difference seems to be less year after year. Since brokers are typically compensated based on the amount of the loan and a jumbo mortgage loan is a larger amount than a conventional, you should feel comfortable negotiating the loan rate with your broker or lender. A good mortgage broker is happy to discuss fees and in most cases appreciates it. This way there are no surprises or concerns after escrow closes.
Anytime you start the loan process whether refinancing or purchasing a home, you are recommended to do your home works on the following steps:
- Review current mortgage rates on the internet and get a feel for the current market. Interest rates change frequently so this step just gives you an idea. When looking over rates make sure you are reviewing jumbo mortgage loan rates as there is a rate difference.
- Assess your loan needs and the amount you think you need
- Ask family or friends for a reference of a mortgage broker
- If you cannot find a referral, you should proceed cautiously and develop a list of questions for your prospective mortgage broker.
- Questions you should ask include: how long have you been doing mortgage loans, are you full-time mortgage broker, how do you price your jumbo mortgage loans, and what education do you have. Asking these questions will give you a good first impression of the mortgage broker.
- Determine if you need to pre-qualify for a loan
- Complete the loan application thoroughly and accurately
If you work with an experienced mortgage broker, the process will be very painless as the mortgage broker will anticipate problems and deal with them proactively.
By following the steps in this article, you are well on your way to getting a great jumbo mortgage loan and will build a long-term trusting relationship with a mortgage broker.
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