To "Jumbo" or not to "Jumbo"!
That is the question ...
Many of my Chicagoland referral partners have been reporting that their higher-end housing markets are seeing healthier sales ...
Margaret Goss, Baird & Warner Real Estate - Winnetka/surrounding communities and Corinne Guest, Barrington Realty Company - Barrington area, each have written posts indicating that the higher-priced properties in their area are once again moving at a better pace. All very good news.Paired along with that is even more good news. Lending options are once again appearing for high-end real estate purchases and refinancing. "Jumbo" loan options are re-emerging.
But what is considered a "Jumbo" loan?
Like so many other questions concerning mortgage financing, there is no one easy, quick, across-the-board answer. But let me start by saying, a "Jumbo" loan is also known as a non-conforming loan. That means it is "not eligible for Fannie Mae or Freddie Mac acquisition".
The threshold amount considered a "Jumbo" loan varies by state, or even market areas ... but in most regions, the maximum amount considered to be "conforming" is $417,000. So, a "Jumbo" is higher than that amount, even if by one dollar.
The mere fact that a loan can be moved or sold via Fannie Mae or Freddie Mac guidelines, translates to more liquidity and lower interest rates. "Jumbo" loans are sold to Private Investors, other banks, hedge funds, or even kept in a private portfolio for the source of the loan.
Because of this fact, loans considered "Jumbos", have historically been higher in Interest Rate by 3/8% to a full 1% (in extreme cases) over conforming loans ($417,000 and less). More recently that has NOT been the case.
So depending on the Sales Price, the Buyer's down payment ability, and eventual loan amount ... I conduct a thorough and detailed examination of ALL financing options available at the time of application ... even those beyond "Jumbo" loan status.
One of those options is a 1st Mortgage at the conforming loan limit (remember: $417,000), coupled with a simultaneous 2nd Mortgage of as much as $250,000 ... or whatever loan amount is needed to meet the needs of the Borrower's transaction.
For example only; consider the following:
(Comparison Interest Rates utilized)
Sales Price: $800,000
Down Payment: $200,000 (from Borrower - 25%)
Loan Needs: $600,000 (eligible to be called a
"Jumbo" loan)
And here's why I'd consider offering the two loan options to my Borrower, versus just one "Jumbo" loan.
Monthly Payment, if figured as a "Jumbo" loan:
$2,995.71 (Principal & Interest Only)
Monthly Payments, if figured with a 1st & 2nd loan:
1st Loan Payment on $417,000:
$1,931.19 (Principal & Interest Only)
2nd Loan Payment on $183,000:
$ 799.00 (Interest Only Payment on 2nd)
Savings realized by taking a 1st & 2nd Loan
versus the one "Jumbo" loan:
$265.52
The mortgage process gets more complicated the higher the financed dollars, as there is more money at risk for the Lenders. The financing options become fewer and the cost of borrowing goes up from a rate standpoint.
When dealing in a higher-end housing market that demands higher amounts financed, it's vitally important to have a Mortgage Lender that is well-versed regarding ALL financing options available to Borrowers ... and also has access to more than one or two mortgage programs for their consideration. As you can see from my comparison above, having options offered to you for consideration can mean considerable savings.
To "Jumbo" or not to "Jumbo"! That is the question ... Because the stakes are so much higher in these transactions, it's definitely no time to work with rookie, inexperienced mortgage lending professionals.
But again, there is more good news for those Home Buyers (or those Refinancing) seeking Chicagoland "Jumbo" loans or financing in higher amounts. That financing and experienced mortgage lending is readily available. Contact me today ...
I can be found at:
Direct: 815.524.2280
Cell: 708.921.6331
eFax: 815.524.2281
eFax: 815.524.2281
Gene Mundt, Mortgage Originator, an Originator with 40 years of mortgage experience, will offer you exemplary mortgage service and advice when seeking: Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including: The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL & WI.
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