Understanding Jumbo Mortgage Loans
Are you considering obtaining a jumbo mortgage loan in order to purchase the home of your dreams? If so, you may find that obtaining a jumbo mortgage in today's market is a bit difficult. Yet, only a year ago, jumbo mortgages were a relatively common type of mortgage loan for future homeowners to use when buying the home of their dreams.
What is a Jumbo Mortgage?
Put simply, a jumbo mortgage is a type of mortgage loan that exceeds the industry standard for a conventional loan. The amount of a mortgage loan that is considered to be conventional is determined by Freddie Mac and Fannie Mae and any loan that exceeds this amount is considered to be a jumbo mortgage. The amount that is considered to be conventional changes each year and certain areas have higher set limits than others. The U.S. Virgin Islands, Hawaii, Alaska and Guam are all areas that have a higher limit placed on conventional loan amounts.
What are the Risks of a Jumbo Mortgage Loan?
Obtaining a jumbo mortgage loan is actually more of a risk for the lender than it is for the buyer in many ways. Even if you have obtained an appraisal that demonstrates the value of the property you wish to purchase, selling one of these homes to the mainstream homebuyer can prove to be difficult. In other words, if you were to default on your loan and the lender were to repossess the home, the lender will likely have more difficulty selling your home because there aren't many buyers in the market capable of paying for a luxury home. In addition, the value of a luxury home can be quite subjective and can change quickly. For that reason, many lenders require at least two appraisal before they will approve a jumbo mortgage loans.
What are the Drawbacks to Getting a Jumbo Mortgage Loan?
Although a jumbo mortgage loan is not necessarily riskier for the buyer, there are drawbacks to getting this type of loan. Namely, jumbo mortgage loans tend to have higher interest rates than conventional mortgage loans. The increase in the interest rate depends greatly on the current market trends, but generally ranges anywhere from 0.25 to 0.5%.
Another drawback to applying for a jumbo mortgage loan is that you may have difficult obtaining the loan. Just as recently as a year ago, jumbo loans were a fairly common phenomenon because the market was stronger and the prices on homes were increasing. With the current status of the market, however, the prices on homes have fallen and lenders have become less willing to take a risk on a jumbo mortgage. Therefore, unless you are getting a great deal on a home with a high appraised value and unless you have an excellent credit history, you may find it nearly impossible to get a jumbo mortgage loan.
About the Author: Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for http://www.electronicappraiser.com/, which is a leading provider of on-line home appraisals and offers a nationwide personalized instant informational report about home appraisal. For more information, please visit .
http://www.electronicappraiser.com.
What is a Jumbo Mortgage?
Put simply, a jumbo mortgage is a type of mortgage loan that exceeds the industry standard for a conventional loan. The amount of a mortgage loan that is considered to be conventional is determined by Freddie Mac and Fannie Mae and any loan that exceeds this amount is considered to be a jumbo mortgage. The amount that is considered to be conventional changes each year and certain areas have higher set limits than others. The U.S. Virgin Islands, Hawaii, Alaska and Guam are all areas that have a higher limit placed on conventional loan amounts.
What are the Risks of a Jumbo Mortgage Loan?
Obtaining a jumbo mortgage loan is actually more of a risk for the lender than it is for the buyer in many ways. Even if you have obtained an appraisal that demonstrates the value of the property you wish to purchase, selling one of these homes to the mainstream homebuyer can prove to be difficult. In other words, if you were to default on your loan and the lender were to repossess the home, the lender will likely have more difficulty selling your home because there aren't many buyers in the market capable of paying for a luxury home. In addition, the value of a luxury home can be quite subjective and can change quickly. For that reason, many lenders require at least two appraisal before they will approve a jumbo mortgage loans.
What are the Drawbacks to Getting a Jumbo Mortgage Loan?
Although a jumbo mortgage loan is not necessarily riskier for the buyer, there are drawbacks to getting this type of loan. Namely, jumbo mortgage loans tend to have higher interest rates than conventional mortgage loans. The increase in the interest rate depends greatly on the current market trends, but generally ranges anywhere from 0.25 to 0.5%.
Another drawback to applying for a jumbo mortgage loan is that you may have difficult obtaining the loan. Just as recently as a year ago, jumbo loans were a fairly common phenomenon because the market was stronger and the prices on homes were increasing. With the current status of the market, however, the prices on homes have fallen and lenders have become less willing to take a risk on a jumbo mortgage. Therefore, unless you are getting a great deal on a home with a high appraised value and unless you have an excellent credit history, you may find it nearly impossible to get a jumbo mortgage loan.
About the Author: Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for http://www.electronicappraiser.com/, which is a leading provider of on-line home appraisals and offers a nationwide personalized instant informational report about home appraisal. For more information, please visit .
http://www.electronicappraiser.com.
Labels: home appraisal, home buying advice, home loans
posted by Electronic Appraiser at
10:17 AM
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