Posts Tagged ‘jumbo mortgage’

Jumbo Loan FAQs

June 7, 2016

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Now that we’ve talked about having the best of both worlds when it comes to Jumbo rates, let’s discuss some other questions people have about Jumbo loans.

Q: What is a Jumbo loan?
A: Any loan amount over $417,000.

Q: How large can Jumbo loans get?
A: There really isn’t a limit, but our office focuses on loan amounts up to $2,000,000.

Q: How much money do I need for a down payment?
A: You can apply for a Jumbo loan with as little as 10% down. The rate is higher, so ideally you’d want to make at least a 20% down payment.

Q: Are the closing costs higher for Jumbo loans?
A: The short answer is yes. The longer answer is this… while Jumbo loans, VA loans, FHA loans, and Conventional loans have some of the same fees associated with the loan program, some of these fees are based on the loan amount such as title insurance, discount points, and in the state of Georgia, the transfer taxes. For example, one transfer tax is 0.001% of the purchase price. That means on a Jumbo purchase of $1,000,000, the fee is $1,000. If it is a conventional loan purchase of $400,000, then the fee is $400. If an FHA purchase of $225,000, then the fee is $225. So while the fees are essentially the same name, some are just much higher than others due to the purchase price/loan amount differences.

Q: Are Jumbo loans harder to qualify for if you are self-employed?
A: No, they are not. The same basic documentation is needed for the loan application. The main parts of underwriting are to ensure the income is stable for all borrowers. This is just looked at more closely for self-employed borrowers, but not any different than applying for a conventional loan.

Q: Are reserves needed for Jumbo loans?
A: Yes.

Q: Ok then, how much reserves are needed?
A: It depends on the loan program. Some require 6 months on the subject property. Others require 12 months. Some even require 6 months on all properties owned. The key is asking your Loan Officer the specifics of the reserve requirements up front so there are no surprises later in the loan process.

Q: Can the reserves be from retirement or other non-liquid accounts?
A: Yes, retirement and other asset accounts can be used. That said, some Jumbo loan programs limit the amount of reserves that can be used from those accounts. Again, ask your Loan Officer for these details.

Looking to buy a home that will require a Jumbo loan? Buying in the state of Georgia? If yes, I can help you get started. Contact me today and we’ll discuss these questions and more.

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Lower Jumbo Rates

May 23, 2016

blog-author-clayjeffreys3

For those out there looking to buy a home with a Jumbo loan, which is a loan amount over $417,000, there are a couple of broad options.

  1. Go with great customer service, but maybe a higher interest rate.
  2. Use one of the big banks who, at times, “discount” the Jumbo interest rate if also opening a checking account at their institution. The larger banks do this sometimes with their Jumbo loan rates as a “loss leader”…. discount the rate to secure a financial relationship with other investment accounts.

So those are the broad options… dealing with some of the potential downfalls with a big bank for a lower rate OR great service but at a higher rate. If there were only a way to combine the two. Well, there is!…

We now have access to one of the larger bank’s Jumbo loan program, which works like this:

  • their Jumbo rates are some of the best in the market, and there is a way to make them even lower.
  • if you open a checking account and agree for the mortgage to be paid via auto draft from that checking account, the interest rate is lowered an additional 0.250% in rate.
  • you get to work directly with a smaller licensed lender at Dunwoody Mortgage Services. I would be your direct contact from start to finish. You would never have to phone a call center or be placed on hold waiting to speak to someone.

It is the best of both worlds!

Looking to buy a home and needing a Jumbo loan? Wanting to avoid call centers and being on hold to get updates on your loan? If you are buying in the state of Georgia, contact me today. I can help you get started toward your home ownership.

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Conventional Loan Limits Rising

July 16, 2015

blog-author-clayjeffreys3

Well, maybe… after a decade of being stuck at $417,000 (although it is higher in the “high cost” areas determined by the government), there may be a rise in the conforming limit. We’ve been down this road before, but it could happen this time. Why?

During the height of the housing boom, many talks focused on raising the limit over $417,000. We all know what happened next… housing crash, home values plummet, and $417,000 was more in line with the market.

Fast forward a few years, and home values are rising again! Some indices show the values are back to pre-recession levels. With home values rising, the Federal Housing Finance Agency (FHFA) is considering the increase in conforming loan limits. This could help spur home purchases. Why?

  • Conventional loans come with smaller down payment requirements than Jumbo loans.
  • Conventional loans typically have better interest rates than Jumbo loans.
  • This makes it easier to qualify for a Conventional loan than a Jumbo loan.
  • Home buyers moving up to a pricier home are more comfortable using a Conventional loan.

The FHFA will decide this fall on whether or not to raise the conforming loan limits. If so, look for increase to begin for new loans starting January 1, 2016.

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Jumbo Loan Alternatives

May 28, 2015

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In my previous blog post, I reviewed recent home price increases and how they can lead to jumbo loans.  We also covered how jumbo loans typically have higher interest rates and down payment requirements as compared to conventional loans.

So what do you do if you need to borrow more than the $417,000 conventional loan limit and you don’t have enough cash to make the 20% down payment required for a jumbo loan?  Under certain circumstances, you can obtain a conventional first mortgage of up to $417,000 and then acquire a second mortgage for the remaining balance.  The second mortgage will have a higher interest rate than the first loan, but you may pay less in interest as compared to a jumbo loan.

Dunwoody Mortgage Services will only provide the first mortgage, but we have lending partners who work with us to deliver this type of secondary financing.  One key criterion is that the borrower must have an excellent credit score.  For example, one of our partner lenders can allow total liens (first plus second mortgage) of up to $750,000 when the borrower has a minimum 740 credit score.  This lender can allow total liens of up to about $917,000 when the borrower has a minimum 760 credit score.  In each case, the borrower must make a 10% down payment – less than the 20% down payment required for a jumbo loan.  But if your credit score is less than 740, you will not qualify.

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Clear as muddy water?  Here is an example to better explain.  Let’s assume (1) you have a 775 credit score, (2) you want to buy a house with a price of $835,000, and (3) you have $85,000 of available cash for a down payment.  So you must borrow $750,000 to buy the house.  To get a jumbo loan, you would have to have $167,000 in cash for the down payment.  And your interest rate (on the day I’m writing this) on your jumbo loan would be about ½ a point higher than a conventional loan rate.  But with only $85,000 available to you, the jumbo loan just won’t work.

But with the second loan strategy, you might be able to make an $85,000 down payment, obtain a first mortgage of $417,000 and a second mortgage of $333,000, bringing your total amount borrowed to $750,000.  Your interest rate (today) on the first mortgage would be about ½ a point lower than a jumbo rate, and you may be able to get a rate on the second loan that is comparable to the jumbo loan rate.

If you want to buy a more expensive home and you need to explore your financing options, give me a call at 770-634-0992.  Comparing different financing scenarios is just a part of the outstanding service we deliver to our customers every day.  I look forward to talking with you.

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Bigger Houses Equal Jumbo Loans

April 28, 2015

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I just read an interesting article by Nick Timiraos in the Wall Street Journal (click here to read the article).  The article focuses on a key reason why new home prices have increased in recent years – Americans are buying bigger new homes.  There were a few points that caught my attention:

  • More than half of the new home price increase in recent years is caused by changes in the size and quality of new homes.
  • Average new home sizes have increased while the size of the average American household has decreased.
  • Government policies (such as mortgage interest deductibility) may encourage the trend of larger new homes.
  • While new home prices have increased more than 100% since 1970, if you adjust for the home size, the price increase is only 23% after adjusting for inflation.

Big House

As home prices rise, this pushes more buyers into the jumbo loan category.  So what is a jumbo loan, you ask?  A jumbo loan is defined by Fannie Mae and Freddie Mac as a mortgage amount greater $417,000 in most areas of the country.  (The limit is higher in certain high-cost locations like Hawaii and Alaska.)  Our lenders will process jumbo loans in amounts up to three million dollars.

So what does it mean to you if you need a jumbo loan?  First of all it affects your down payment.  With conventional loans, lenders will allow you to put as little as 3% down on your purchase.  With jumbo loans, the minimum down payment is significantly larger.  Secondly, obtaining a jumbo loan often means that you pay a higher interest rate.  On the day I am writing this, with all other lending criteria being equal, the difference between a jumbo and conforming loan is about one half of one percent for one of our lenders.

So as are looking to move up to a larger home, remember the rules for a jumbo loan differ from those you had when obtaining your current conforming or FHA loan.  Give me a call to discuss your options and loan pricing.  And keep an eye out for my next blog post where I will discuss ways to stay within conforming loan limits to avoid the higher cost jumbo mortgages.

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