If you are buying a home in a state with high prices, you know financing can be an issue. This brings up the issue of the jumbo loan.

The mortgage loans industry is unique compared to other financial markets. Why? Well, it has to do with the federal government. Specifically, the government provides mortgage financing to individuals by guaranteeing the debt owed to lenders, much the way a parent might do when co-signing a loan for child. Loans that the government will secure are known as conforming loans. These loans are much easier to get because the lender carries almost no risk when issuing them. If you default, the government is on the line through agencies such as FHA, HUD, Fannie Mae and so on.

Unfortunately, the government does not provide much assistance to mortgage applicants in areas with high home prices. The various government programs carry cap restrictions over a certain amount depending on the specific agency offer the program. The top cap for a government mortgage is in the $400,000 range. Any loan application for an amount in excess of this figure does not qualify.

Obviously, a majority of homes in many areas require financing in excess of the government caps. Such loans are known as non-conforming or jumbo loans. With a jumbo mortgage, a lender is a bit stricter in evaluating your application because it knows the government will not back it. As a result, you can expect to pay a bit higher interest rate than with a conforming loan.

A jumbo loan is a form of private financing. There are tons of lenders that offer them, but the terms for the jumbo loans vary dramatically. Simply put, you need to shop the loan to various lenders to find the best deal. Even a quarter percent difference in interest rates can save you tens or hundreds of thousands of dollars over the life of the loan.

Author: Sergio Haros
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The down payment seems to be one of the most important factors in buying a home.  As it should be, because the more money you put down, the lower your total monthly mortgage payment will be.

A down payment should be determined by the following questions:

1.  How much can you afford?

You should NOT consider all the money you have in your savings account towards the purchase of a home.  Why?  Well, let’s say the water heater happens to break down in the first year of buying the home.  That kind of break down can cost thousands of dollars!  It’s something most people would never expect, but it’s possible. 

You see, most people buy an existing home (especially a first time home buyer) and existing homes do have wear and tear just like anything else.  Eventually, something will break or tear, leading to a repair.  Sometimes it may only cost $10, but other times it may cost $5000.  So, keep a little money in that savings account in case of an emergency.  You will thank me later!

2.  Is the monthly payment or the down payment more important to me?

It’s quite simple, the more money you put down, the less your overall monthly payment will be.  The less of a down payment you have, the more your overall monthly payment will be.

Example in real numbers:

The purchase price is $200,000 and you decide that a down payment of 20% is something you can afford.  The principal and interest payment (not including the taxes and insurance) on a 30 year mortgage at 5.0% would be $858.91.  Now, assuming the same scenario, but the down payment is only 10%, the payment would be $966.28.  The difference in a monthly payment is $107.37.  Over 1 year that’s $1288.44.  Over 5 years that’s $6442.20!

The important part to keep in mind about that example is that the difference in monthly payments just saved you $6442.20 over the next 5 years, because the down payment is only 10%.  Now, the difference in down payment money is $10,000.  So, if you are looking to save the most money out of your pocket, then put a less money down.  As long as the monthly payment is affordable, you will always keep more money will less of a down payment.

3.  What is the minimum down payment lenders allow?

Right now, in today’s lending environment, there are only 2 ways to obtain a mortgage with absolutely no money down.

1. VA Mortgage Loan – You can be eligible for this type of mortgage if you or your spouse is active in the military or is a veteran of the military.
2. Rural Housing Loan – You can be eligible for this type of mortgage if the home you are looking to buy is in a rural housing area.  The area is determined by the USDA.

If you don’t qualify for a no down payment mortgage loan, then the next lowest down payment mortgage is a FHA mortgage loan.  FHA only requires a minimum of 3.5% for a down payment.  Yes, only 3.5% is required for a down payment with this mortgage program.  It has become the most popular program lately, because of it’s low down payment, favorable interest rates, and you can still qualify will less than perfect credit.

These are the types of questions you should know the answers to before looking to buy a new home.  The more knowledge you have, the more comfortable you will be in making an offer on a home.

If you are a first time home buyer, learn more at www.genuinemortgageadvice.com

Author: Joshua Bucio
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Buying a home in any part of the country is extremely difficult because of the lending crunch and how it has impacted home buying tendencies. My wife and I actually have friends who put down close to thirty bids before one finally stuck. Because lending is so scarce in some instances, older people are putting down cash bids and buying up homes at a discounted rate. It is almost frightening for any homeowner who does not actually have $500,000 on hand!

In searching for homes and condos, my wife and I wandered by a condo that was new and had been sitting there for quite a while unoccupied. We had seen the place three months ago, but decided it was too expensive for what our price range was. When we returned recently, we discovered two great pieces of information. First, we discovered that the prices of the different units had gone down due to the lack of demand. We had also discovered that instead of a management company showing the units, and independent jumbo mortgage lender was showing us around all of the units. By independent, I mean this was not a subsidiary of Bank of America, Wells Fargo or JP Morgan Chase.

Since this was an independent jumbo mortgage lender, they had many more lending options than just FHA loans or traditional 20 percent down payment loans. This lender was willing to discuss jumbo loans, and was even willing to offer a lower interest rate for jumbo mortgage rates. While we still do not have 20 percent to pay for a down payment, we realized we could go with a 10 percent down payment and get a jumbo loan with a great interest rate.

We felt like people who had accidentally discovered a buried treasure. So many of the homes and established condos we looked at throughout our city had limited lending options for us. The price range we are looking out does not always fit into the FHA loan threshold and our credit scores are not always a good fit for traditional home mortgage loans. We have been looking at jumbo loans for quite a while, and we sort of stumbled upon it.

If you want to find alternative lending options in your area, here’s what we did:

1. Look for a new development, such as condos, town homes or housing developments. These areas are sometimes desperate to unload their homes and so go through a lender to show off the units or houses.

2. Looking for new developments that have been on the market a while. Developers want to recoup their investment, which means they will be willing to look at alternative lending options instead of global lenders who have tight underwriting guidelines, loan thresholds or other road blocks. A jumbo mortgage lender will often be more willing to work with you to get the deal done.

If you follow these steps I think you will achieve exactly what you are looking for as well.

Author: J. Chase
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FHA conforming and non-conforming are the two main types of reverse mortgages, the latter commonly known as a Jumbo Reverse Mortgage. When the value of a home exceeds the FHA conforming loan limit for their county, a senior homeowner has the option of a jumbo loan. An FHA conforming loan limit is the maximum amount of home value that Fannie Mae will recognize in calculating the amount of money that they will lend on the home. As in much of California, most counties with high cost homes have a conforming loan limit for reverse mortgages of $362,790.

Jumbo Reverse Mortgages do not have the same value restriction as FHA reverse mortgages, so they can offer a larger amount of money to the borrower when their home value is significantly greater than the conforming limit. When a senior’s home value greatly exceeds $362,790 (or the conforming FHA reverse mortgage limit for their county) they ought to consider all of the available Jumbo Reverse Mortgage programs. Still, the FHA reverse mortgage (known as the Home Equity Conversion Mortgage or HECM) is often the better choice until the home value far exceeds the FHA conforming limit, because it offers a much greater percentage of the home’s first $362,790 in value.

An example of this would be a 74 year old with a home in San Diego County, California that is worth $400,000 might qualify for $225,000 under the FHA reverse mortgage, while the Jumbo program would only offer $160,000. As the example shows, Jumbo Reverse Mortgages are designed to be much more conservative in the percentage of the value of the home that they will offer. In the industry, this more conservative lending percentage is known as “loan-to-value” ratio. Despite the conservative loan-to-value ratio of the jumbo, it will overtake the FHA reverse mortgage when the value of the home is very high. If the 72 year olds’ home is worth $700,000 for example, then they might qualify for $280,000, which is $55,000 more than the FHA reverse mortgage would offer.

The amount of money available under the Jumbo Reverse Mortgage increases as the home value goes up, while the FHA program does not change due to the conforming loan limits. Generally speaking, Jumbos begin to make financial sense when the home is worth over $600,000, but there are exceptions for both higher and lower values. Check with your reverse mortgage lender for a quote and to see if a jumbo reverse mortgage could be right for you.

Author: Luke P Helm
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As of November 20, 2007, lenders across America are mostly doing away with Stated Super Jumbo Seconds.

The sub-prime meltdown actually began in December 2006, when lenders did away with stated 100% investor loans and it has gone much, much further since then.

Estimated losses due to foreclosure of Adjustable Rate Mortgages actually adjusting this year and next year are in the billions, if not trillions, and lenders are responding by removing products from their portfolios.

Like anything else, the mortgage market is driven by supply and demand, and the supply actually comes from Wall Street Banks who are willing to buy closed loans from Mortgage Lenders. Wall Street had up until very recently, a seemingly insatiable appetite for sub-prime loans, alt A loans, and jumbo loans. (The press has combined everything that isn’t A Paper into the heading sub-prime, when actually sub-prime loans are loans with substandard credit.)

Alt A Loans are loans that are A Paper loans, but with alternative documentation – stated income, stated asset, no doc, etc.

And obviously Jumbos, Super Jumbos and Mega Jumbos could be prime, sub-prime or alt a loans as far as the credit rating is concerned, and the documentation likewise could be any level.

The press and Capital Hill with their multiple legislation attempts have all lumped together any loan that is not fully documented, conventional loan limits and a plain vanilla 30 year fixed rate into the now hated “sub-prime” category. Neither the press nor the legislators have the time or inclination to learn the vagaries of the mortgage business and do their jobs “on the fly” as it were, and so, there is bad information and misinformation flying everywhere.

With the losses Wall Street Banks are experiencing in foreclosures of all kinds, they’ve lost their appetite for anything other than strictly A paper loans. They aren’t buying much, and so, the supply of money for mortgages has gone to an historical low.

Stated owner occupied loans for purchases and refinances are topped at 90% ltv; stated investor loans for purchases and refinances are also topped at 90%, and credit score requirements s for everything have gone up to levels previously regarded as pristine. That is, of course if your home is not a multi-million dollar purchase or refinance and then you are really looking at 65% to 70% max.

Estimates for the duration of this dearth of funds range from six months to two years. With the programs available for refinances, and talked about to become available for refinances, to the rational mind, it seems that this shouldn’t last forever. The strange thing is that borrowers who are in trouble don’t seem to be trying to do anything about their foreclosures because the numbers just keep getting larger every month.

FHA Secure for instance will allow a refinance of a mortgage already in default, with no regard for the late payments if they occurred after the loan’s interest rate adjusted.

The FHA is, in my opinion, the sub-prime loan of choice – the rates are as good as, conventional interest rates, and when that is combined with the fact that they IGNORE late payments, I would think people would be clamoring for those loans.

Additionally, if the value of a house has gone down during this market turbulence, and the property was originally bought with a first and a second, they will allow the second to stay, even if the LTV goes over 100%.

Fannie Mae and Freddie Mac are considering raising conforming loan limits above the $417,000 maximum presently allowed in order to assist borrowers in California (where nothing costs less than $417K). While this was regarded as a probability earlier on, it seems to have lost steam lately.

And finally, there is the possibility of a work out arrangement with the lender to whom one is late. While it may not be the perfect arrangement because at this point in time the fees allowable on forbearance workarounds are still very high, there is legislation pending that will limit the amount mortgage companies can actually charge for late fees, payoffs, forbearance, etc.

If you’re buying one of those million dollar bargains, be prepared to appear at the closing table with big bucks. If you’re interested in refinancing your ARM, Get BUSY. Opportunities abound, and the country is going to be in trouble if they aren’t refinanced.

Author: Traci Gregory
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There are many types of mortgage loans. It can become quite confusing trying to distinguish between them all. Some appear to be low interest rate mortgage loans, but in reality have a high interest rate when all other components are considered. Many times these details are buried in the fine print of the loan. Smart borrowers research and understand exactly what they are signing.

Mortgages have several different important components. These relate to the duration of the loan, the stated initial interest rate, how the interest rate is calculated into the future, the required down payment, and whether there are points or fees assessed at closing. Each of these components must be fully understood by every potential borrower.

The duration for mortgages used to be standard. They were 30 year terms at the end of which the homeowners would celebrate by burning the mortgage papers. Those days are mostly gone, however it is still wise to stick with a 30 year mortgage. Some lenders offer longer terms which make the monthly payment smaller. However, these are not a wise choice.

When you extend the mortgage repayment period you are reducing the amount of principal you are paying down each month. This reduces the amount of equity you build in your home. Having equity is beneficial for many reasons. One of which is it makes refinancing easier down the line in the future if interest rates should drop.

Some mortgages have fixed interest rates. This means that the initial interest rate you see remains constant during the entire life of the mortgage. This removes unwanted surprises if the market interest rate suddenly increases. Many families budget for the initial payment amount then are caught short when interest rates go up. A fixed rate prevents this.

A fixed rate doesn’t mean that you can’t take advantage of future rates should they lower. You can refinance at that point taking advantage of a lower rate. Some mortgages have what are called adjustable rates. These loans have rates that change along with market interest rates. They can be artificially low with what are called “teaser rates”.

You are best served to avoid adjustable rate loans and teaser rate loans. Selecting these loans can subject you to a drastically higher mortgage payment in the future. A fixed rate loan is predictable and you know exactly what your mortgage payment will be. There will be no surprises putting you in a position not to be able to afford your mortgage payment.

Low interest rate mortgage loans can in reality be traps. Look beyond the stated interest rate you are lured with and down to the fine print. That is where the relevant details are usually to be found. Make sure your loan’s low interest rate is fixed and not adjustable. Ensure it is not a teaser rate. Pay attention to the details and be a smart borrower.

Author: Adam Hefner
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Compared to other mortgage rates jumbo mortgage rates can vary greatly. A jumbo mortgage is one where the amount is greater than the industry-standard limits. The limits are set by the two largest wholesale home loan lenders which are Fannie Mae and Freddie Mac. There are also “super-jumbo” loans which is anything in excess of $650,000. This limit can vary, as it did when it was temporarily increased until the end of 2008, although some say that doing so was not beneficial.

The rate on a jumbo might be different from a standard conforming loan, typically higher. The rate in normal economic conditions might be a quarter of half a percent higher, but in times of great economic uncertainty it can be more than one percent. This is because such a home loan is a greater risk to the lender because luxury homes typically take longer to sell and are also more affected by the changes in market conditions. Due to the slightly higher risk, the down payments for jumbos are also typically higher than for standard loans.

Due to increase in real estate prices up to about 2008, more borrowers had to seek these larger than standard loans. This tends to result in longer-term loans, sometimes 40 or even 50 years, for which the lender takes a higher profit. Also if the down payment was less than twenty percent, the loan had to be insured, resulting in fees which were sometimes considerably higher.

However in recent times this insurance rate is sometimes built into the loan interest rate so a borrower can pay less than the 20% down payment without excessive fees. This structuring might not be as beneficial to borrowers as if initially appears because if the insurance fees were paid separately they often cease all together when the borrower has repaid more than 20% of the loan.

The rates themselves can of course vary considerably over time. Typically they might be lower in times of economic hardship or uncertainty.

Compared to other mortgage rates jumbo rates are usually slightly higher than for standard loans due to the slightly higher risk to the lender.

Author: Thomas Goldman
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Have you ever wondered how people purchase those million dollar homes? Although many put down substantial down payments, several finance a mortgage just like the rest of us. These highly priced mortgages are known as Jumbo and Super Jumbo Mortgages.

Jumbo mortgages are loans that exceed $417,000 as of 2006. Super Jumbo loans are mortgage loans that are typically $750,000 or higher. These limits are adjusted yearly to reflect the current market changes.

Jumbo mortgages are also known as non-conforming loans because they do not comply with FHA underwriting mortgage limits that are set each year. Fannie Mae and Freddie Mac agencies buy the majority of mortgage securities from the loan originators. They have a limit on the maximum dollar value of each mortgage they will buy that is in accordance of the FHA underwriting mortgage limits. In 2006 it was raised to $417,000. Insurance companies and large banks usually help finance the excessive mortgages like Jumbo and Super Jumbo mortgages that can go up to six million dollars.

Jumbo and Super Jumbo mortgages usually have slightly higher interest rates than that of a conforming home mortgage, that is a mortgage under $417,000. Interest rates on these non-conforming loans also vary according to the home value and property classification.

If you are interested in a Jumbo or Super Jumbo loan you can go to jumboloans.com and fill out one single form. Afterwards up to four lenders will reply with their best offer. This form does not require your social security number. It is also not an application for credit but connects you to the top lenders that serve your area.

Afterwards, you can contact one or all of these lenders to find out more information about the loan process, requirements, and interest rates estimate for the home you potentially want to purchase.

Author: Milos Pesic
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There are programs to help when you don’t have the down payment to buy a home. With today’s high real estate prices, struggling to come up with a 20 percent down payment to buy a home can be a daunting task. Fortunately, there are options that can help. Many lenders now offer non-traditional no-down-payment mortgages or second mortgages to cover the cost of a down payment.

No-down-payment mortgage
With a no-down-payment mortgage, 100 percent of the purchase price of a home is financed with a single mortgage and the homebuyer makes one monthly mortgage payment. The advantage, especially when housing prices are escalating, is that you can enter the housing market without waiting to save up a down payment. The disadvantage of this type of financing is that you are likely to be charged a higher interest rate than you would with a standard mortgage. This means your monthly mortgage payment will be higher. Also, because you didn’t make the standard 20 percent down payment, you will have to pay private mortgage insurance (PMI) to protect the lender in the event that you default on your loan.

Second mortgage
Another option for buying a home without a down payment is a second mortgage, often called a piggyback loan. If you use an 80/20 loan, 80 percent of the purchase price can be financed through a first mortgage and the remaining 20 percent comes from a second mortgage. The advantage of this type of loan is that you don’t have to pay private mortgage insurance. The disadvantage is that the second mortgage usually carries a higher interest rate than the first. You must therefore assess whether you are better off paying for the insurance or the additional carrying costs.

Before choosing a no-down-payment loan, you should consider both your own personal situation and the state of the housing market. When housing prices are escalating, it may make sense to jump into the market as soon as possible. However, the reverse is also true. If you were to choose a no-down-payment mortgage and the price of houses were to drop in value, you could find yourself in the position of owing more for your home than it’s potential resale value. So weigh all of the factors carefully and discuss with your lender if it’s the right option for you.

Author: Leonard Taylor
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One of the best ways to fund purchasing of your home is to go in either for a mortgage or a home loan. It is necessary for you to control your expenditures to ensure that you are financially strong enough to finance a home loan. This requires you to compare the competitive rates offered by various lending institutions and also the cost of mortgage to obtain the best home mortgage rate. A judicious comparison of various mortgage rates will enable you to obtain the best mortgage rate that suits your needs.

This is essential because taking extra efforts of comparing the costs of mortgage for various lenders will enable you to select the best mortgage lender thereby saving your hard earned money.

Before taking the step of identifying the best mortgage rate, it is necessary for you to prepare a cash flow statement to present to the financial institutions. Next you must collect the necessary mortgage data from lenders, banks, thrift institutions, mortgage companies and credit unions. You should not overlook the option of engaging a mortgage broker if you find it difficult to prepare a cash flow statement on your own. You will find that the mortgage broker has ready information on various mortgage offers that the financial institutions give and this will help in you identifying the best home mortgage rate.

You can find out the financial institutions that offer the best home mortgage rate by tabulating the institutions vs. current mortgage rates and sorting them out either in the descending order or ascending order. This will help you in locating the institution with low/ high interest rates or in between interest rates. It is advisable to check on the fixed as well as adjustable interest rates so that you have an idea about the fluctuations in the market regarding mortgage interest. 

In addition to the low mortgage interest rates, there are a number of other things that you should consider before making your final decision. These are annual percentage, fees to be paid to the lenders and points that are required to get lower home mortgage interest rates. A number of other expenses are involved in taking the home mortgage loan such as underwriting fees, fees that are to be paid to brokers, transaction settlement and any other closing costs levied by the institution. In order to negotiate with the financial institutions for getting the best mortgage home loan, the above information are vital.

You will find that the various lending institutions offer different interest rates for the mortgage loan for mortgages that are similar in nature and these rates vary on a daily basis. In order to get the best home mortgage rate you should negotiate with various lenders so that you can get reductions in your mortgage interest rates and also get waivers by doing a bit of comparison shopping.

The home mortgage calculator is one of the most powerful tools available for calculating the best home mortgage rate and also to find whether a particular mortgage is affordable to you or not. This will reduce your headache in calculating this data without the calculator.

After selecting the best home mortgage rate as well as the lender, you must enter into a legally binding agreement with the lender; in addition, you should take a written lock-in from the mortgage broker. Comparing various mortgage rates offered by different financial institutions and conducting hard negotiations with these institutions is the key to identify the best home mortgage rate.

Author: Chang Seward
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