The Truth About Jumbo Mortgage Loans
The average price of a home in the United States is right around 300,000 dollars. When you apply for a mortgage to purchase a home around that average price, the general rules of mortgage loans apply. But what happens when the price of the home you want to purchase far exceeds the typical home price? Jumbo Mortgage loans are offered by banks for homes that exceed a certain price limit.
Expensive homes are typically harder to sell. For one, there are fewer buyers that fall into the category of qualifying for a high priced home purchase. Secondly, the people that do fall into that category sometimes have specific ideas about what they want their home to be like.
Since the homes are harder to sell, banks know that if the owner defaults on the loan, there isn't much of likelihood that they'll be able to sell the home, even in foreclosure. Since banks know these homes are high risk homes to finance, banks only offer the mortgages with specific guidelines.
Jumbo mortgage loans are offered only when the borrower can put down a large down payment on the home. Twenty percent of the cost of the home is usually considered a good down payment for a regular mortgage. But twenty percent usually isn't even enough when purchasing a high priced home.
High interest rates are typically involved in the terms of the loans as well. The larger the loan amount, the more interest you will be paying each month. So higher interest rates really increase your monthly mortgage because not only is the interest rate high, but the amount you are paying interest on is extremely large as well.
The final way banks try to absorb some of the risk of the loan by making money is to attach high closing costs to the mortgage. Usually, closing costs are a percentage of the price of the home, so naturally, a high priced home is going to have higher closing costs.
In February of 2008, as part of a stimulus package, President Bush signed off on temporarily increasing the jumbo mortgage limit to 729,750 dollars. This was an increase of 125 percent more than what the typically jumbo limit had been.
Jumbo mortgages are extremely expensive. If you want to purchase a high-end luxury home, unless you have the cash to buy the home on your own, you will have to borrow money from a bank to finance the home.
Expensive homes are typically harder to sell. For one, there are fewer buyers that fall into the category of qualifying for a high priced home purchase. Secondly, the people that do fall into that category sometimes have specific ideas about what they want their home to be like.
Since the homes are harder to sell, banks know that if the owner defaults on the loan, there isn't much of likelihood that they'll be able to sell the home, even in foreclosure. Since banks know these homes are high risk homes to finance, banks only offer the mortgages with specific guidelines.
Jumbo mortgage loans are offered only when the borrower can put down a large down payment on the home. Twenty percent of the cost of the home is usually considered a good down payment for a regular mortgage. But twenty percent usually isn't even enough when purchasing a high priced home.
High interest rates are typically involved in the terms of the loans as well. The larger the loan amount, the more interest you will be paying each month. So higher interest rates really increase your monthly mortgage because not only is the interest rate high, but the amount you are paying interest on is extremely large as well.
The final way banks try to absorb some of the risk of the loan by making money is to attach high closing costs to the mortgage. Usually, closing costs are a percentage of the price of the home, so naturally, a high priced home is going to have higher closing costs.
In February of 2008, as part of a stimulus package, President Bush signed off on temporarily increasing the jumbo mortgage limit to 729,750 dollars. This was an increase of 125 percent more than what the typically jumbo limit had been.
Jumbo mortgages are extremely expensive. If you want to purchase a high-end luxury home, unless you have the cash to buy the home on your own, you will have to borrow money from a bank to finance the home.
About the Author:
Sarah gives meaningful advice that has helped hundreds of people to get mortgage loans for people with bad credit and some other types of bad credit home loans such as home equity loans.
posted by Credit Counseling at
3:45 PM
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