The decline of the housing market saw many mortgage programs become extinct. Stricter lending standards across the board for all mortgage loan types became the norm and are still in place today. In particular, jumbo mortgage borrowers may find that it is more difficult to receive loan approval. In the past, having a good credit score and a low down payment was often all that was needed. In today’s mortgage market, jumbo mortgages require a credit score over 700 and often as high as 740. A minimum of 20% down payment in now required and must come from the borrower’s own funds that can be documented with recent bank statements. Gifts for the down payment are not permitted with jumbo mortgages. Income, whether an employee or self employed, must be fully documented with pay stubs, w2′s and income tax returns. In some cases, even business income tax returns are required by the lender. DTI (debt to income) ratios have come down to approximately 38% for jumbo mortgage approval which can be difficult for some borrowers. Jumbo mortgages require that the property must be the primary residence of the borrower and cannot be used as vacation homes, second homes or investment property. Even the property valuation can cause issues with approval and often requires more than one appraisal to confirm the market value.

On the positive side, jumbo mortgage rates are at all time lows. Borrowers who want long term security can choose a jumbo 30 year fixed mortgage rate at 4.125% or a jumbo 15 year fixed mortgage rates at 3.375%. For lower monthly mortgage payments, jumbo 5/1 adjustable mortgage rates are at 2.500%. These are the lowest available with 0.7 to 1% origination fee. As compared to the past when jumbo mortgage rates were much higher, current jumbo mortgage rates are not much higher than conforming and FHA mortgage rates.

All mortgage programs have changed in recent years and jumbo mortgages are a part of the transition. Jumbo mortgages involve a larger amount of money and lenders are not going to take chances of a default because these properties are more difficult to sell. Since there is a much smaller market of buyers for homes that require jumbo mortgages, it is only normal that lenders would become stricter in order to reduce their exposure and risk.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

According to Moody’s, the jumbo mortgage sector is still at risk of facing a large increase in defaults. Since property values across the board have declined, many jumbo mortgage holders are now underwater which presents a risk of strategic default, otherwise known as walking away. While there are several programs available for conforming and FHA mortgages to assist borrowers who have fallen on hard times, this is not the case for jumbo mortgages. That is why having enough savings to carry a jumbo mortgage is vital, not only for the loan transaction, but also for other unfortunate circumstances that may occur. Since jumbo mortgage monthly payments are usually high, having enough funds for other expenses is crucial. Although debt to income guidelines are capped at approximately 38% and additional reserves for jumbo mortgages are required, a borrower needs to really look and see if they have enough extra money for something as devastating as a job loss. The debt to income tells one story for the lender, but in reality, many other things may occur such as unanticipated repairs, sickness, injury or even an unplanned vacation. There should also be money left over each month just to enjoy living since the life of the jumbo mortgage will last for years to come.

Preparing ahead of time by having a high credit score is an important step in order to receive the lowest jumbo mortgage rate available which translates into a lower monthly mortgage payment. Living comfortably with the monthly payment will lead to successful, long term homeownership.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

While the basic documentation guidelines for jumbo mortgages are similar to conforming mortgages, the numbers and ratios involved for loan approval are different. Borrowers are required to have an excellent credit history with higher credit scores which are evidence of financial responsibility and considered less of a risk to the lender. The expected debt to income ratio is also lower than conforming mortgages. Since the required loan to value ratio for a jumbo mortgage is often lower than a conforming mortgage, substantial assets are required in order to have enough for the necessary down payment. Lenders also require enough assets to cover additional months of reserves which can often be as much as six to twelve months. Property requirements can also be stricter and may require more than one appraisal.

Since jumbo mortgages cannot be sold through Fannie Mae and Freddie Mac, they are not offered by every lender and can be more difficult and more expensive to obtain. Jumbo mortgage rates are also higher than conforming mortgage rates and can vary from lender to lender. Since points can be added on to jumbo mortgage rates based on risk, borrowers should attain the highest credit score possible prior to mortgage application.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

An appraisal, which is performed by an independent professional appraiser, is necessary in order to determine the market value of the property that is be purchased and mortgaged. This is done for the protection of both the buyer and the lender. Although the appraiser inspects the property, he is not an inspector and does not perform a property inspection. The appraisal is a normal and mandatory procedure in the mortgage process. Problems often arise, especially with higher priced properties, since the appraisal must compare the property with other similar properties in the area and the average sales price for a certain time period. The purchase price must be close to the average sales price in order to be accepted for the jumbo mortgage.

A larger problem evolves when a borrower is purchasing a new home that is or is not yet built in a upcoming, new development. Often, the appraiser is looking at only the housing plans and specs for the appraisal. If the development is building larger and higher priced homes in an area that is predominantly average priced homes, there is the potential for pricing problems since there may not be any properties in the area to produce comparables for an accurate market value. Appraisers can only search homes within a certain distance in order to find comparables, otherwise known as comps. This was a common problem during the housing boom when high end developments were being built in average neighborhoods. Often, this type of situation will require additional paperwork or even a second appraisal, depending on the lender. In some cases, the jumbo mortgage will not be approved.

When looking for a higher priced home, whether it is existing or new, borrowers should know the home prices of the area prior to making a decision. The importance of property value for a jumbo mortgage has become even more significant since overall home prices have dropped. In many cases, borrowers will need to put additional money into the transaction in order to bring the loan down to an amount that is determined by the lender so that the transaction is relative to the market value, not purchase price.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

There are several reasons that this happened. As more consumers tried to save money, banks had more money to lend. When financial institutions have cash coming in, they will look to see what types of investments they could make. This made jumbo mortgages more appealing to banks. Banks then offered jumbo mortgages with historic low jumbo mortgage rates this past year. Right now, jumbo 30 year fixed mortgage rates are at 4.125%, jumbo 15 year fixed mortgage rates are at 3.375% and jumbo 5/1 adjustable mortgage rates are at 2.500%. These low jumbo mortgage rates, which are available with 0.7 to 1% origination fee, have been stable for quite some time. The amount of savings that can be obtained when purchasing a high end property with these low rates was unheard of going back a few years ago and current borrowers recognized this. When housing prices dropped around the country, high end properties were also involved in the decline. This scenario sent high end home buyers out searching for a bargain. High end properties were being discounted from their original prices due to market conditions and then could further be negotiated by buyers. This move in high end real estate then increased the need for jumbo mortgages. At the same time, the conforming mortgage loan limit was higher for most of the year, which freed up more funds for jumbo mortgages that are necessary above the limit.

The jumbo mortgage market for higher priced properties is really a different type of market. Many of the borrowers of this category, although affected by the economic downturn, did not suffer the same repercussions as middle class borrowers. With lenders more willing to offer low rate loans to these borrowers, jumbo mortgages made a comeback in 2011 and may very well continue to lead the real estate market in 2012.

Jumbo mortgages are those that are above the conforming and FHA loan limit. The conforming loan limit is $417,000 while the FHA loan limit is $729,750. When the FHA loam limit was once again increased earlier this month, this opened up an opportunity by reducing the amount of borrowers who would normally be seeking a jumbo mortgage. With some of these borrowers going through FHA, the jumbo mortgage market became a little less crowded giving high end borrowers a better chance of obtaining a jumbo loan. Since jumbo mortgages are not government insured, they are normally kept by the lender within their portfolio. Lenders are apt to limit the amount of jumbo mortgages that they approve in order to reduce their overall mortgage risk.

The most significant reason that this is a good time for jumbo mortgages is that jumbo mortgage rates are so low, in fact historically low. Current jumbo 30 year fixed mortgage rates are at 4.125% which is less than 1% higher than conforming mortgage rates. The same is true for jumbo 15 year fixed mortgage rates which are at 3.375%. A large number of high end borrowers choose jumbo adjustable mortgage rates in order to have the lowest possible mortgage payments for several years. Jumbo 5/1 adjustable mortgage rates are at 2.500% which is only .250% higher than conforming 5/1 adjustable mortgage rates (these jumbo mortgage rates are available with 0.7 to 1% origination fee). When looking at these numbers, jumbo mortgage rates are currently just as affordable as other mortgage rates, maybe even more so.

Lastly, housing prices are down and that also includes prices for high end homes. This means that high end borrowers are also looking at more affordable home prices within their spending bracket which has created the perfect scenario in a home buyers market. Borrowers can choose to either purchase a lower priced, high end home or buy more home with their money.

As with all mortgages, including jumbo mortgages, good timing is essential. More important is for borrowers to be well prepared in advance so that they are ready to take on the challenge since no one can predict how long this will last.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

Jumbo mortgage monthly payments are usually higher than regular mortgage payments because of the larger amount of money involved and the higher jumbo mortgage rate that was locked at the time of closing. Borrowers who have a jumbo mortgage with an adjustable mortgage rate may have locked at lower ARM rates several years ago. Knowing how adjustable mortgage rates work and when they adjust, this is one circumstance where borrowers should consider refinancing to a jumbo fixed mortgage rate especially at this time when jumbo fixed mortgage rates are so low. This would makes sense particularly for borrowers who are planning to remain in the home for the long term. Having equity in the home and an excellent mortgage payment history will help to make the jumbo mortgage refinance even easier for the borrower since the lender will consider it less of a risk. Another reason to refinance a jumbo mortgage would be if the borrower is having financial difficulties or sees the potential for this to happen down the road. Refinancing a jumbo mortgage prior to falling into financial trouble is the key since refinancing does not hurt your credit. When jumbo mortgage rates are low, a borrower may find that the debt to income ratio with the new lower mortgage rate has decreased significantly because of the lower monthly mortgage payment. This ultimately helps with moving through the approval process quicker.

Current jumbo 30 year fixed mortgage rates are at 4.125% which is much lower than several years ago. Refinancing jumbo mortgages does not have to be difficult. Making the decision to do so is the first step to saving a substantial amount of money with reduced monthly mortgage payments.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

Jumbo mortgages have certain requirements by lenders since they are considered private mortgages. One of those requirements is that borrowers need substantial income, whether from outside employment or self employment. Of course, any type of employment also needs to be fully documented for the lender. When a potential borrower has enough cash assets to cover the cost of purchasing a home, the decision needs to be made whether to use the available cash or to take on a jumbo mortgage loan. Just taking a look at the mortgage interest deduction for income taxes can be enough to help a borrower make this decision.

According to the IRS, in order for the mortgage interest to be deductible, the debt must be secured by the residence and can be no more than two residences. In addition, you must be personally obligated for the repayment of the debt. The mortgage must be for purchasing, building or substantially improving a residence and cannot exceed $1,000,000. Considering the low jumbo mortgage rates being offered today, it could be a good tax decision to take the jumbo mortgage for the tax deduction and invest the cash in something that has a higher rate of return. Current jumbo 30 year fixed mortgage rates are at 4.250%, jumbo 15 year fixed mortgage rates are at 4.375% and jumbo 5/1 adjustable mortgage rates are at 3.250%. The mortgage interest paid over the course of a year can be quite a substantial tax deduction. At the same time, the investment returns may exceed the mortgage interest paid out.

Choosing between a jumbo mortgage vs. cash purchase is really a financial planning decision. Not only is there a tax advantage with the jumbo mortgage, but if market conditions are favorable, investing the cash for a higher rate of return becomes a winning situation.

Jumbo mortgages require that credit scores be at least 720 or higher in order to receive approval. FHA mortgages have much easier credit qualifying and will accept credit scores as low as 500. This alone can be the deciding factor of choosing between the two mortgage programs for some borrowers. Then there is the down payment requirements for jumbo mortgages which are usually 20%, while FHA mortgages require 3.5% with a credit score as low as 580 and 10% with a score between 500 and 580. Although this low down payment may sound enticing, the higher mortgage amount will result in a higher monthly mortgage payment.

Borrowers who have good credit scores and enough cash to meet jumbo mortgage down payment requirements will then need to look at the fees that are applied to FHA mortgages. At closing, FHA mortgages charge an upfront mortgage insurance premium and other fees which will make closing costs (APR) higher. There is also a monthly mortgage insurance premium that is added to the monthly mortgage payment. This FHA monthly mortgage insurance cost continues until the loan to value reaches 78%, but must be paid for a minimum of five years.

For borrowers who can qualify for either type of mortgage, the decision may come down to mortgage rates. Jumbo mortgage rates tend to run approximately 1% higher than FHA mortgage rates. Current jumbo 30 year fixed mortgage rates are at 4.500%, jumbo 15 year fixed mortgage rates are at 4.375% and jumbo 5/1 adjustable mortgage rates are at 3.250%. As always, the decision of whether to choose a jumbo mortgage vs. FHA mortgage with higher loan limits will be determined by looking at the actual numbers for both mortgage loan programs which can be done by a qualified lender. Weighing the benefits and drawbacks of each program as well as the total costs and savings will be necessary in order to make an informed choice.

A cash in refinance, which has become very popular, is the complete opposite of the well known cash out refinance. With a cash in refinance, the borrower brings money to the closing to pay down the principal amount of the mortgage. This reduces the mortgage loan to the allowable amount that can be financed. Since the reduction of the conforming loan limits on October 1st, many mortgages are now above the limit for a conventional refinance. When this happens, there are only a few things that borrowers can do. One is to bring cash to closing in order to bring the mortgage amount down to the conforming loan limit of their area, which many borrowers have chosen to do. This can put many borrowers into a hardship since they may be using the bulk of their available cash. Many borrowers may choose not to refinance because they do not want to give up their savings funds or they do not have enough funds to pay off some of the principal. There is an alternative to the cash in refinance.

Since jumbo mortgage rates are also at record lows at this period in time and not much higher than conforming mortgage rates, it may be a better idea to refinance to a jumbo mortgage instead of a cash in refinance. Current 30 year jumbo mortgage rates are at 4.500%, jumbo 15 year fixed mortgage rates are at 4.375% and jumbo 5/1 adjustable mortgage rates are at 3.250%, all available with 0.7 to 1% origination fee. By choosing a jumbo mortgage in these circumstances, any available cash will be counted as reserves for the mortgage approval. This keeps the cash in the borrower’s hands allowing for other investments, upgrades to the home or other unexpected emergencies. In the meantime, the refinanced jumbo mortgage should still produce a lower monthly mortgage payment. For many borrowers, making the choice for a jumbo mortgage refinance can be a very wise financial strategy while providing these borrowers with a safety net at the same time.