Jumbo Mortgages are for High Priced Homes
Jumbo mortgages are the types of loans associated with exceptionally high priced homes and, subsequently, also carry higher interest rates. A jumbo mortgage differs from traditional home mortgages only due to the amount borrowed to purchase the home. Mortgages that fall under a certain amount, known as a cap, can be received from lenders after going through the customary application processes. Jumbo loans are more difficult to qualify for and carry higher interest rates, as there is additional risk due to the high amount of money being borrowed to purchase the home. A home mortgage is determined to be jumbo only under terms determined by Fannie Mae and Freddie Mac which examines the average market prices for homes nationally.
The cap for home loans
Housing costs have skyrocketed over the last several years, causing the cap, or ceiling for a traditional mortgage loan to increase. Currently, lenders are to consider a mortgage a jumbo loan if the amount of money borrowed exceeds $417,000. With the increased interest rate, lenders are all too happy to loan this amount of money to well qualified buyers.
Strategies to Avoid Jumbo Rates
Jumbo loans can be avoided. Several mortgage companies will allow a potential, well-qualified homeowner to take out a first mortgage and a second mortgage to avoid the high interest rate and costs associated with a jumbo loan. Since jumbo rates are high, over the lifetime of a loan, thousands of dollars can be saved by using this strategy.
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