Jumbo Specialist     

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Jim Pendleton   MrMortgageTM    NMLS 684537

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Jim Pendleton - MrMortgagetm

Jumbo mortgage rates are applied to homes with mortgage values above "conforming  limits" used to purchase high-priced homes that require larger than normal loans. While they're convenient, jumbo mortgage rates, they also charge slightly higher interest rates. Tha dollar amount that defines a jumbo mortgage rates is redefined each year, it's subject to Fredie of Fannie Mae guidline change.

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 The term "jumbo" mortgage rate applies to loans for exceptionally high dollar amounts.Bigger isn't always better, especially when it comes to home mortgages. Each year, Fannie Mae (FNMA) and Freddie Mac (FHLMC), the government-affiliated agencies that market mortgages within the U.S., define the point at which a traditional mortgage rates ends, and a jumbo begins. Jumbo types of loans are increasingly popular-and necessary-for buyers trying to borrow large amounts using jumbo mortgage rates to purchase their homes.

Although it does not seem fair that higher mortgages are saddled with higher interest rates, but the economic logic behind it makes sense. When you consider than both FHMA and FHLMC purchase the bulk of U.S. residential mortgages from lenders, and then resell them to professional investors. The jumbo loans aren't as easy as conventional loans to resell to investors, so the market for them is smaller. The Jumbo mortgages often packaged together, and then traded on the street in a similar manner to the way stocks are traded on Wall Street. The results of rates increase cause the lenders typically charge more interest on these mortgages to help make them more profitable to the Wall Street crowd.

What's in a mortgage cap?

When limits for jumbo loans were reset last year, the new ceiling on conventional loans was raised significantly. So, "jumbo status" kicks in for any mortgage loan amount above $417,000. This significant change was considered necessary because housing prices in the U.S. had risen dramatically since the last adjustment. Consumers and lenders alike welcomed the new limit.Now, it's not unusual for homes to cost $400,000 or more, even if they're not considered luxurious.  There are special exceptions for places like Hawaii-where the cost of living is higher than usual- allow for even higher caps.

How to avoid jumbo mortgage rates

 Some mortgage companies will let you take out two loans at the same time-one as a first mortgage for the bulk of the money, plus a small second mortgage that will work in tandem with the first. Because jumbo loans carry higher rates-usually a quarter of a percent higher than conventional loans-consumers who are borrowing an amount that's close to the limit will often try to figure out ways to avoid triggering jumbo status. Here is an example, for a $550,000 purchase, you might be able to use a conventional loan to borrow $415,000, and then come up with the rest through a smaller second mortgage for $135,000.

The new mortgage interest rate on the smaller loan will likely be higher, but you can pay it off in a relatively short period of time. By appling this method,  the jumbo rate on the significantly larger loan more than pays for any added costs on the second loan.

When considering lifetime of a loan, the savings gained by qualifying for a slightly reduced rate can be huge, adding up to tens of thousands of dollars. Now that's a jumbo savings!

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