Bigger and Fatter than a Hot dog: Take a Bite out of the JUMBO LoanInk Well Mag September 20, 2016 0 COMMENTS
A mortgage with a loan considers itself a “jumbo” when it exceeds the conforming loan limits. These limits, set by the Office of Federal Housing Enterprise Oversight (OFHEO), provide you more purchasing power.
Until the end of the year, the current conforming loan limits for a home large enough for a single family stands at $417,000 within all states, save for Hawaii and Alaska, where the limit is at $625,500. With a higher financial ceiling, it is just reasonable for jumbo loans to require higher interest rates, harsher underwriting, and bigger down payments.
Munching on a JUMBO Loan
To indulge your humor, you can actually compare a jumbo loan to a hot dog, only that the former is way larger than life—you don’t call it a “Jumbo Loan” for no reason. This type of loan is available in terms of 15 and 30 years, either with fixed or adjustable rates.
Take, for example, how Primary Residential Mortgage, Inc. describes the jumbo loan. The company says that these mortgages have “stricter guidelines due to higher loan amounts.” So, if you intend on taking out a jumbo loan, don’t bite more than what you can’t chew. In other words, you should be able to afford the repayments, lest you choke midway.
Lastly, a jumbo loan is available for a number of properties. Like a hot dog, an all-around food for snacking, jumbo loans are available for residences, second homes, vacation villas, and investment properties.
Why Not More JUMBO Loans For Everyone?
Guy Cecala, the CEO and publisher of Inside Mortgage Finance, cites statistics showing the first mortgages during the first quarter of 2016. About 20.3% of all these were jumbo loans – an 18.9% increase from last year. This, says an online financier, is a manifestation of supply and demand for capital.
Here are some considerations if, and when, you want a jumbo loan: prepare before applying by cleaning up your credit score, create a relationship, and don’t hesitate to negotiate—especially when you’re looking to seize a jumbo loan.