Jumbo Loans - Another Option for Mortgage Shoppers
Get a lot more house for a little more interest
Jumbo loans, as the name suggests, is the kind of mortgage and refinancing solution that allows you to reach "oversized" goals with basically the same resources.
When all other conventional financing alternatives fail for one reason or another, a fixed- or adjustable-rate jumbo loan could be the perfect way to your financial salvation.
With this alternative, you pay a little more in interest compared to a conventional loan.
But that large, impressive and expensive house that you've always dreamed of, but could not qualify for, might end up justifying the higher expense of your jumbo loan.
To understand a jumbo loan better, we first need to understand what the non-jumbo "conforming" loans are all about.
Let's start with two very important Government-Sponsored Enterprises (GSE), Fannie Mae and Freddie Mac, which have the corner on mortgage buying and selling business in the United States.
With full blessings of the federal government, these two publicly chartered powerful organizations set the loan limits in January every year for single-, double-, triple- and quadruple-family housing units.
For example, those limits for 2006 are $417,650 (for 1 Family), $533,850 (for 2 Family), $645,300 (for 3 Family) and $801,950 (for 4 Family) dollars.
Loans up to these limits are known as "conforming loans" since they conform with the Fannie Mae and Freddie Mac imposed limits.
If you need to borrow more than these amounts you need a non-conforming loan, which is also known as a Jumbo Loan.
Since the conforming loans are bought and sold regularly by Fannie Mae and Freddie Mac, they have higher "liquidity," they present a lower investment risk and thus they also come with a lower interest rate.
Jumbo loans, on the other hand, cannot be bought or sold by Fannie Mae or Freddie Mac, and thus come with a higher interest rate.
So why is there such a great demand for jumbo loans today?
There are two simple but strong reasons:
- If you are an investor with a good credit rating you may want to pay a higher interest rate in order not to miss out on an excellent business opportunity. For example, you might have difficulty in getting a normal conforming loan for a multi-unit apartment building that you can rent out to individual tenants and create an immediate positive cash flow. In such a case a jumbo loan could be the perfect solution for you.
- At the other end of the spectrum, let's say you have bad credit or have difficulty in documenting your income, or declared bankruptcy just a few years ago. In such situations it would be difficult to get a conventional loan. But again a jumbo loan can get you out of that jam in no time.
The differences between the conforming and jumbo loan interest rates might not be as great as you think either. A Congressional Budget Office study estimated that rates on fixed-rate jumbo mortgages exceeded those on similar conforming mortgages by only an average of 0.18 to 0.25 percentage points between 1995 and June 2000.
So go ahead and Call us TODAY at (877) 310-FUND to discuss your specific needs in strict confidence. Who knows? A jumbo loan might be exactly what the "doctor ordered" for your particular mortgage ailment.
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