Most Americans don't seek a jumbo mortgage. In fact, lenders nationwide only have about 4 percent of all their mortgage loans fall into the jumbo category.
However, there are certain advantages to seeking a jumbo mortgage and you can do take some steps that will reduce or eliminate your down payment, reduce your monthly mortgage or give you other options that will save thousand over the life of your loan.
Defining a Jumbo Mortgage
The first thing is to understand the definition of a jumbo mortgage. Simply put, a jumbo mortgage is a loan that is too large to be backed by the federal government as in a FHA loan, USDA loan or VA loan.
Those parameters are set by the government and vary in certain areas deemed “high cost.” For those seeking a home in San Diego, it pays to know that San Diego is one of the cities considered on the high cost list. That means you will have a higher threshold set by the government before a loan is considered a jumbo loan.
Who Approves Jumbo Loans?
Jumbo loans are approved by a number of lenders nationwide. The difference between these lenders and those who approve non-jumbo loans is jumbo loan lenders typically don't advertise the fact they service these type of loans. You will need to look for a good lender capable of handling a jumbo loan.
Now that you understand a little more about jumbo loans, we can move ahead and tell you some ways you can use a jumbo loan to save you money. There are five San Diego jumbo mortgage rate hacks you can use this year.
(Please note - there are new higher loan limits in 2021 - the limits posted below are for 2020 - all of these are being updated as we speak - on my new website - coming by 12/11)
Here's a quick rundown of our list:
- 1. Look to see if any niche loans are available.
- 2. Look to see if you fall into a group for special deals.
- 3. Look at other creative options for jumbo loans.
- 4. Aim to get approved quickly.
- 5. Understand the limits of your area.
- 6. Get an extra appraisal.
1. Look to see if any niche loans are available.
There are mortgage lenders who custom design loans for certain groups of people. They keep these on their books as portfolio loans because they are created to be investments.
Wall Street doesn't buy these loans and they are not required to meet loan standards set by the government. Guidelines and approval are totally up to the lender.
These type of niche loans open up a world for home buyers who may not get financed any other way. Some of loans require no money down, have no maximum loan size limit and even waive income verification. There are hundreds of these type of loans available.
2. Look to see if you fall into a group for special deals.
For instance retired mortgage applicants may not be required to prove their income. Doctors can use a doctor's loan program to get a jumbo loan and put down only 10 percent up to a $2 million home loan and not pay any mortgage insurance.
3. Look at other creative options for jumbo loans.
One of the best feature of a jumbo loan is they don't conform to set government rules, so you can do a number of things with them. For instance, you can use a jumbo loan to close a loan in trust.
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4. Aim to get approved quickly.
As with any loan, getting approved can either be fast or take an enormous amount of time. That really depends on whether you have proper documentation ready when you apply.
To get a fast turn-around approval time, you need to have a good verifiable income, an above-average credit score and at least 25 percent of the purchase price ready as a down payment.
You will need to have some proof of all this and that includes a bank statement showing you have money for a down payment in the bank, W-W2s and recent tax returns showing income and your latest credit report.
5. Understand the limits of your area.
Limits that separates traditional mortgages from jumbo mortgages are increasing in 2020 | 2021. For most of the country, a jumbo mortgage for a single-family home starts at $701,500.
However, San Diego joins many other larger metro cities considered in a high-cost area. This is an area where homes typically cost more than others nationwide.
Other cities that fall into the category are San Francisco, Los Angeles, Manhattan, Brooklyn, Queens, Staten Island, Bronx, and areas around Washington D.C as well as the nation's capital.
Jumbo loan are a good way to finance a home without tying up cash and get a competitive interest rate without staying inside government restrictions.
The jumbo loan limits were set as part of the Housing and Economic Recovery Act of 2008. The purpose was to make sure conforming loans backed by Fannie Mae or Freddie Mac would be available to the most people. Jumbo loans are considered a greater risk, so lenders are required to take on the risk if they issue them.
6. Get an extra appraisal.
Have a second appraisal on the home's value in hand when you talk to lenders will go a long way to convince them it is worth the value of your loan.
You may have special reasons for seeking out a jumbo loan. It isn't for everyone, but it could be the right loan for people in certain niche groups or who need a loan that doesn’t conform to all the rules. If you think you can benefit from a jumbo mortgage loan, you should research to see how it may benefit you and the interest rate you will pay.
Those interested in this possibility should call or email me with any questions.
I'm happy to help and will answer any questions you have about buying a home using this option.
Shoot me a text or call to (760) 297-4539
Your Jumbo Insider,