Mortgage

Jumbo Mortgage Charges: Jumbo Lending Charges and Necessities for 2020

Jumbo loan rates enable high-priced home purchases

Jumbo mortgages aren't just for the rich and famous.

With property prices soaring across the country – and the fact that many high-cost areas are becoming even more expensive – a jumbo mortgage can make sense for many who may not have considered one.

And a jumbo loan can be surprisingly affordable.

Jumbo mortgage rates are often even lower than conforming lending rates. However, with some lenders, they are higher. So, you need to do your due diligence and look for the best jumbo mortgage rate that you can get.

Check Your Jumbo Loan Rates (Nov 2, 2020)

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What is a Jumbo Loan?

Conventional or "conforming" loans (supported by Fannie Mae and Freddie Mac) have credit limits attached. These are set by the FHFA (Federal Housing Agency) and usually change at the beginning of each year.

A jumbo mortgage, or “jumbo loan,” is simply a mortgage with a loan amount that is greater than today's compliant loan limits allow.

The conventional credit limit for 2020 in most parts of the country is $ 510,400. So a jumbo loan is a mortgage with a loan balance greater than $ 510,400 in these areas.

Note that the credit limits in certain regions of the country with particularly high property prices are expanded. These are primarily large metropolitan areas where house values ​​have rapidly increased in value over the years.

The full range of conventional credit limits for 2020 is as follows:

Lower cost area
High-cost area (maximum credit limit)

1 unit
$ 510,400
$ 765,600
2 units
$ 653,550
$ 980,325
3 units
$ 789,950
$ 1,184,925
4 units
$ 981,700
$ 1,472,550

While credit limits are set in stone, house prices are not.

The result is that expensive homes cannot be financed with typical loans. What do borrowers do? You finance and refinance with jumbo loans that have no credit limits.

From January 1st, the credit limits for Fannie Mae and Freddie Mac will change.

Jumbo mortgage rates

Jumbo mortgages may appear to have jumbo interest rates, but they are not necessarily so.

As with other mortgages, jumbo rates move up and down every day. Sometimes they are higher than the 30 year loan rate and sometimes lower.

According to Andy Walden, Economist and Director of Market Research at Black Knight, compliant loans averaged 3.96% in September 2019.

Jumbo mortgages were cheaper averaging 3.59%.

And in September 2020? The two were neck to neck.

According to Walden, both conforming and jumbo loans were rated at just 2.98% at this point.

For those who qualify, a jumbo loan near or under 3% is a rare opportunity to secure funding for high-priced real estate at a much lower interest rate and monthly payment than usual.

Check Your Jumbo Loan Rates (Nov 2, 2020)

How to Qualify for a Jumbo Mortgage

Obviously, when you get a particularly large mortgage, lenders want to be extra sure that you can afford the loan payments.

Hence, jumbo loans are more qualified than other mortgage programs.

Typical requirements for qualifying for a jumbo mortgage are:

Credit Score of at least 700A Clean Credit ReportA Down payment of at least 10 percent, in most casesA Debt-to-Income Ratio less than 45 percent Cash reserves to cover 6-12 months of future mortgage payments, Project and Employment Review

As with all types of loans, lenders can set their own jumbo loan requirements. Some may be even stricter than listed above – for example, a 20% deposit or a credit score of over 720 is required.

But some lenders are also more lenient.

In today's mortgage market, it is possible to find jumbo loans with only 5 percent less, which would have been almost impossible in the past.

It may even be possible to find a jumbo loan with a down payment of less than 20% and no mortgage insurance. However, most low down payment jumbo loans require PMI, just like compliant loans.

The trick is to look around and find what you need.

Especially with jumbo loans, which are not regulated by any government agency, there are likely to be very different loan programs for different borrowers.

Find the one that suits your needs and you will get the best loan terms and low jumbo mortgage rate for your situation.

Check your eligibility for Jumbo Loans (November 2, 2020).

Types of Jumbo Loans

Home buyers and homeowner refinancing can choose the type of jumbo mortgage loan that works best for them.

A fixed rate jumbo mortgage has an interest rate and payment that will stay the same over the life of the loan unless you choose to refinanceA variable rate jumbo mortgageOn the other hand, there is only one fixed rate for the first few years (usually 5, 7 or 10). Thereafter, the rate and monthly payment can change every yearA jumbo payout refinance allows the homeowner to refinance their current mortgage, withdraw cash on completion, and likely secure a lower interest rate at the same time

Where can I get a jumbo loan?

Not everyone needs a jumbo loan, but for those who conduct such financing, it is widely available. Most of the major lenders offer them, although prices and requirements vary by company.

Walden informed us that as of August, jumbo mortgages accounted for 3.28% of all new loans. However, because of their size, jumbo loans also made up 11.61% of all original loan balances.

Lenders naturally like larger loans because of their attractive economy. So it is unlikely that you will have trouble finding one when you need it.

How big is Jumbo?

If you need a loan for more than $ 510,400, you are probably in the jumbo finance realm in most areas. But how high can you go

Let's just say there's no need to worry about getting the most out of a jumbo loan – when you have the money to pay it off.

The Los Angeles Times reported in 2017 that Jay-Z and Beyoncé paid $ 88 million for a house. After paying the $ 35.2 million (40%) down payment, they funded the remainder with a $ 52.8 million mortgage.

In August 2017, the typical mortgage rate was 3.88%. We don't know the exact loan terms, but if you borrow $ 52.8M at 3.88% over a 30 year period, the monthly payment for principal and interest is $ 248,436. Taxes and insurance are extra …

There may be even bigger mortgages out there. The point is, lenders will likely welcome your jumbo business when you have the cash, security, and credit.

Why Jumbo Mortgage Rates Can Be Lower Than Other Loans

There are several reasons why jumbo interest rates are generally in the same range as the loans sold to Fannie Mae and Freddie Mac.

When lenders sell loans to Fannie Mae and Freddie Mac, they must pay what are known as guarantee fees (G fees). These fees represent a cost to the lender, but the borrower usually pays them in the form of higher interest rates.

Jumbo Loans are not being sold to Fannie Mae and Freddie Mac because they exceed the credit limits. The result is that jumbo lenders don't have to pay the associated G fees. This is a direct saving for jumbo mortgage borrowers.

When a bank is looking to run its business, jumbo rates can be remarkably attractive.

For example, if you can get business accounts and credit needs to a bank, a low interest rate jumbo loan can be part of the package.

Check your eligibility for Jumbo Loans (November 2, 2020).

Why Jumbo Mortgage May Be Higher Than Other Loans

A jumbo loan is great by nature. It inherently poses a higher risk to a lender than a standard size FHA loan, VA loan, or compliant loan. More risk drives interest rates higher.

That's not all.

Jumbo loans don't have to adhere to appropriate mortgage rules. This means that not only can jumbos be larger than the credit limits allow, but other standards can also be different.

For example, a lender might agree with a higher debt-to-income ratio or accept a lower credit score. But the more you need a lender, the more likely the lender will want something in return.

That "something" usually consists of a higher jumbo mortgage rate, additional fees, a larger down payment, or maybe two instead of a valuation.

And sometimes lenders want more.

For example, in July 2020, CNBC reported that “Wells Fargo (requested) new customers to bring in at least $ 1 million in credit to refinance a jumbo mortgage, up from a previous $ 250,000 policy. "

It did so during the coronavirus pandemic, when economic uncertainty created additional risk for borrowers and lenders.

This is just one example of how the economy as a whole can have a positive or negative impact on mortgage rates – including jumbo loan rates.

What are today's jumbo mortgage rates?

Mortgage and refinancing rates are currently low for all types of loans.

If you have strong funds and a sizable down payment, you may be able to qualify for a jumbo mortgage rate that is equal to or less than today's average rate.

Check your new plan (November 2, 2020)

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