Did you know that you can get financing for a million dollar home? Well, it is possible with a Pembroke Pines jumbo loan provided by Nationwide Home Loans.
A jumbo loan is a mortgage that exceeds the set conforming limits.
Currently, conforming loans have a limit of $453, 100. This means that you cannot get a conventional mortgage that exceeds that amount from a private lender. The conforming limit mentioned above is for a single unit, however, it is possible to get a higher amount if you are purchasing more than one unit.
If you are looking for a home for your family though, it is not possible to get that limit.
One more thing you need to know is that unlike conforming loans that are backed by Government sponsored entities such as Fannie Mae and Freddie Mac, Pembroke Pines jumbo loans are not backed by GSEs.
The conforming loan limit is not set in stone. Every year in November, the FHFA announces the new conforming limit which is based on home prices from the previous October to the current one.
When prices in the housing market go up, so does the conforming limit.
Since jumbo loans are not bought by Fannie Mae and Freddie Mac, the interest charged by lenders tend to be higher compared to the interest rate charged for conforming loans. This is occasioned by the fact that lenders are taking on a bigger risk by lending huge sums to borrowers.
Jumbo Loan Variations
Jumbo loans vary by region and property type. Below are situations when jumbo limits might vary:
In places where property prices are higher, conforming loan limits are higher in those States to reflect the housing market. For instance the conforming loan limits for homes in high cost areas of D.C is $679,650.
Some jumbo loan amount limits are expanded
Jumbo loan limits for multi-unit properties are usually higher e.g a triplex or duplex’s conforming loan limit will be higher when compared to a single-unit family home.
One of the reasons why jumbo loans are considered risky for investors is because they are associated with luxury residences which are much harder to offload from the market. Also unlike moderately priced homes, luxury homes suffer from valuations shifts during market downs and ups.
Why getting a jumbo loan is difficult
There are many reasons why a borrower might find it difficult to get a jumbo loan. This includes:
- Not all banks offer a jumbo loan
- Higher down payment is required for instance, the borrower might be asked to make a 10% down payment which is significantly higher
- Credit score requirements make it hard for most borrowers to qualify
- Jumbo underwriting guidelines vary from one lender to the next
- Higher mortgage rates are actually quite common
Conforming Jumbo loans
Legislation has introduced a new loan program known as conforming jumbo loans. These are neither conforming loans nor jumbo loans. The range between the maximum conforming loan limit in low cost areas and the maximum conforming loan limit in high-cost areas. If the property is not based in the contiguous States, the mortgage amount might be significantly higher.
Conforming jumbo loans are also referred to as high balance mortgages. However, they are only found in the more expensive housing markets. In Los Angeles County, a borrower can get up to $679,650 without the mortgage being considered a jumbo loan.
Counties with lower home values such as Phoenix, Miami and Chicago have the same conforming limit as the rest of the nation.
Though the difference between a conforming loan and a conforming jumbo loan might not seem great, a conforming jumbo will be slightly cheaper than a conforming loan making it achievable for many people who would otherwise not qualify for a jumbo loan.
Because conforming jumbo loans are backed by both Fannie Mae and Freddie Mac, many lenders offer them creating sufficient supply for them in the market. This is different from jumbo loans which can only be provided by specific lenders.
For instance, it is possible to purchase an $849,500 home if you put down 20%. That keeps the loan amount just below the limit.
Jumbo Mortgage Rates are generally higher
Due to the amount of risk associated with Pembroke Pines jumbo loans, they attract interest rates that are slightly higher to conforming loan rates. The difference usually ranges between 0.25% and 0.50% higher.
Sometimes borrowers might lose out on lender credit being offered for a conforming loan which translates to higher closing costs.
Take your time when comparing jumbo loan rates from one lender to another. You might be surprised to come across a lender whose adjustable rate mortgages are more competitive compared to their fixed rate mortgage or vice versa. Take your time to compare mortgage offerings from one bank to the next.