Jumbo Mortgages 101
For the past few years housing prices have been rising at a frightening pace. If you are already in the home owner’s market, then this is terrific. For those who are not, these can be frustrating times.
In the United States, the mortgage industry is regulated by the organizations known as Fannie Mae and Freddie Mac at the time of writing. Borrowing limits are set by these two organizations. If you wish to purchase a house which is above the set limit then you will need what is referred to in the industry as a “Jumbo Mortgage Loan”. Below are the fundamentals to Jumbo Mortgages.
The “conforming limit” is the set limit for a conventional mortgage in the United States. In 2006 Fannie Mae and Freddie Mac set $417,000 as the conforming limit. If you should wish to purchase a house in an area where this is not going to be enough borrowings, then you will need non-traditional financing from a jumbo lender. The disadvantage with jumbo lenders is that due to increased risk they charge higher rates of interest.
See this article if you want to know the legal pitfalls of arranging a mortgage.
Jumbo mortgages have additional costs associated with them, and as such it is vital to do your research before you apply for your loan. Careful research of the various lenders and their loan offers should prevent you from making costly errors commonly made by borrowers with jumbo mortgages. You have to take into account more than just the Annual Percentage Rate with a Jumbo Mortgage. The lender will provide you with a “Good Faith Estimate” to enable you to make an informed comparison between the various jumbo loans available to you.
Then there is mortgage cycling. This is worth considering but deserves another article to give it credit. In the mean time, you can read this introductory page to learn more on mortgage cycling if you want quicker equity and mortgage reduction but without using the same old ‘Hoo Haa‘ that everyone already knows.
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Tag: mortgages