A jumbo mortgage is simply a very large mortgage just like its name implies. More specifically, a jumbo mortgage is a mortgage where the amount that is financed is more than the amount that has been set by GSE or Government Sponsored Enterprises who sets the guidelines for jumbo loans. GSE is a group of financial companies that maintains access to housing loans and reduces the cost of the loans so that consumers can buy homes. The traditional guideline amount that has been set for a mortgage by GSE has been $600,000.00 because this is the amount that GSE has set as part of their duties.
If a mortgage is larger than this amount then it receives the class of being a jumbo mortgage. Since we know that there are many homes that cost more than that amount, then we should know that the need for a jumbo loan has increased because home prices have increased as much as there are homes that are available. Many lenders will offer jumbo loans, however some lenders do not. A jumbo mortgage will carry more of a risk for a lender because the mortgage payments tend to be quite high and no matter how well your financial situation,something could go wrong.
Also higher priced homes can take a lot longer to sell than a lower priced home because not as many people can afford these homes, so if the home owner should have financial problems it could take awhile to get out of the mortgage loan and a default on the loan could occur. Many lenders will require a larger down payment on a jumbo mortgage as a result of the higher priced homes and the chance of financial issues.
Interest rates will be higher for a mortgage that goes above the GSE’s maximum guideline mount. With traditional mortgages a homebuyer may be able to purchase a home for little or no money down,however this is not so with a jumbo mortgage because of the inherent risk to the mortgage lender.. These larger loans will require some money down, however the process for getting a jumbo loan is very similar to a traditional loan for a lower priced home. If you have found a home that has been hit by higher home prices, don’t give up hope because there is probably a jumbo mortgage available for you if your credit is good and you have the ability to repay the mortgage loan.
On the other hand, be prepared for the loan to cost a little more than a smaller mortgage, not just with the amount borrowed but also to borrow the money. So if you see a home that you want and you know you can afford it, don’t be turned off by the price because there is a solution to help you buy your dream home.