Jumbo mortgages are loans that exceed the current conforming loan limits, which is currently $417,000 in most areas in the U.S. and all areas in Texas and Georgia that Global Home Finance Inc. serves. The dollar amount that jumbo mortgages, also sometimes called non-conforming loans, start at is re-defined on an annual basis.
Each year, Fannie Mae (FNMA) and Freddie Mac (FHLMC), the government-affiliated agencies that market mortgages within the U.S., define the point at which a traditional mortgage ends, and a jumbo mortgage begins. These types of loans are increasingly popular-and necessary-for buyers trying to borrow large amounts to purchase their homes. The national conforming loan limits for mortgages that finance single-family one-unit properties has increased from $33,000 in the early 1970’s to $417,000 in 2006-2008, and have stayed at that number until date. There are certain “high balance” areas where the limits are 50 percent higher. Somewhere around 100 zip codes in the country have a limit that is higher and four statutorily-designated high cost areas: Alaska, Hawaii, Guam, and the U.S. Virgin Islands. None of the zip codes are in Texas or Georgia where we originate.
Since 2008, the “high balance” areas have benefited from various legislative acts increasing the loan limits in certain high-cost areas in the United States. These are temporary limits that were enacted to help supplement these areas availability of financing due to the economic downturn and reduction in non-conforming credit availability. While some of the legislative initiatives established temporary limits for loans originated in select time periods, a permanent formula was established under the Housing and Economic Recovery Act of 2008 (HERA). The 2015 loan limits have been set under the HERA formula.
Jumbo mortgages generally carry a marginally higher interest rate than the conforming conventional mortgages that are under $417,000. It may not seem fair that higher mortgages are saddled with higher interest rates, but the economic logic behind it makes sense. Both FHMA and FHLMC purchase the bulk of U.S. residential mortgages from lenders, and then resell them to professional investors. They’re packaged together, and then traded on the market in a similar manner to the way stocks are traded on Wall Street. But jumbo loans aren’t as easy as conventional loans to resell to investors, so the market for them is smaller. As a result, lenders typically charge more interest on these mortgages to help make them more profitable. The increased yield attracts investors to put more risk in a single property with a single borrower rather than spreading it across multiple other securities for the same dollar amount.
Global Home Finance Inc. can originate Jumbo mortgage loans all the way up to five million and possibly more depending on the individual and property. GHF has access to a broad spectrum of secondary market investors and lenders to allow all the way up to a 90% loan to value with no mortgage insurance.
Strategies for Avoiding Jumbo Rates
Because jumbo loans carry higher rates-usually a quarter of a percent higher than conventional loans-consumers who are borrowing an amount that’s close to the limit will often try to figure out ways to avoid triggering jumbo status. Global Home Finance Inc. generally can package a $417,000 1st with a smaller second mortgage to avoid the slightly higher price on the majority of the money financed if it is not much over the $417,000. Above $521,250 it is generally better to go ahead and do the jumbo mortgage as a standalone security.
For example, for a $500,000 purchase, you might be able to use a conventional loan to borrow $417,000, and then come up with 10% of the purchase price through a smaller second mortgage for $33,000 then you would only have to put 10% of your own money into the loan and meet any reserve requirements established by the end investor or lender.
The interest rate on the smaller loan will likely be slightly higher, but you can pay it off in a relatively short period of time since it is a much smaller amount. Avoiding the jumbo rate on the significantly larger loan can more than pay for any added costs, (approximately $575 at the time of this writing), on the second loan.
Over the lifetime of a loan, the savings gained by qualifying for a slightly reduced rate can be huge, adding up to tens of thousands of dollars. That means that working with Global Home Finance Inc. and their experienced Residential Mortgage Loan Origination experts can mean a jumbo savings for you!
Special Opportunities for Acting Now
Home buyers who are shopping for upscale property or thinking of refinancing should consider taking advantage of the historically low rates before the Federal Reserve’s January 2016 meeting. It is the current consensus of secondary markets professionals that the Federal Reserve may raise rates then. Acting now is in anyone’s best interest that is thinking of buying their dream home.
Global Home Finance Inc. is a small Texas Mortgage Banker and Broker who only employs licensed residential mortgage loan originators. All of our current loan originators staff handling jumbo mortgages have at least 8 years of mortgage origination experience and have been employed by Global Home Finance Inc. for at least 2 years. Your expert will work with you through the entire process as your main point of contact providing you Concierge service. Your calls will always be answered by a human and you will be treated with the respect and attention that you deserve. Any company who truly values your business should offer no less.
Also, you can be sure that when you call Global Home Finance Inc. that you will speak with a licensed and experienced professional with at least 8 years of mortgage experience and at least 2 years of employment with Global Home Finance Inc.
Getting your Jumbo mortgage through a mortgage banker like Global Home Finance Inc. will allow you to borrow a large amount of money without having to go to non-traditional lenders. Otherwise, you might have to seek private lenders who specialize in so-called “hard money” loans, and offer loans at extremely high rates with short balloon or demand periods requiring you to refinance quickly out of their financing. Generally you will pay only a fractionally higher interest rate than on a conventional conforming loan below $417,000 for these super-sized loans. Global Home Finance Inc. Residential Mortgage Loan Originators stay updated on current guidelines, products, and programs from our network of investors and lenders. You won’t regret working with the professionals at Global Home Finance Inc. Read more about our Concierge Service for Jumbo mortgage customers.