Jumbo Loans Needed for Regular Homes in Some Areas

By: | January 30th, 2013

When obtaining a mortgage for a home purchase, the amount of financing that is needed is sometimes more than the conforming and FHA loan limits. Conforming loan limits are $417,000 in most areas and $625,500 in high cost areas. The FHA loan limit is $729,750 which also depends on the location of the property. For anything above these limits, a jumbo loan is necessary. While it may be thought that jumbo mortgages are only for luxury homes, jumbo loans are often needed for regular homes in some areas.

In many locations around the country, a regular home is often more expensive that what would be considered normal. This usually happens in metropolitan areas such as New York City and its’ surrounding suburbs. Virginia and California also have areas where the price for a normal home is more costly. These are considered high priced areas where jumbo mortgages are often required. Homes in these locations are not luxury residences and would actually cost much less if located elsewhere.

Many borrowers who require jumbo loans are not considered wealthy and are not purchasing high end homes. In some cases, borrowers many be purchasing multi-unit homes in the hopes of having rental units that bring in income. Since jumbo mortgages are not sold to Fannie Mae or Freddie Mac, nor are they insured by FHA, lenders set their own guidelines, rules, mortgage rates and terms. A lot of the resulting loans are based on the creditworthiness of the borrower and overall profile, as well as, the amount of funds the borrower has available for the down payment. It is well known that borrowers must have excellent credit in order to receive a jumbo mortgage.

While jumbo mortgage rates are not much higher than conforming mortgages, jumbo loan borrowers will be held to a higher standard and stricter qualification guidelines due to the large amount of financing that is needed. Being prepared in advance when applying for a jumbo loan is an important part of the process. surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at about a 1 point origination fee.


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