What’s A Jumbo Mortgage?

Ever wondered how some people purchase those 1,000,000 dollar homes? Although many people put down sizeable down payments, many folks finance a mortgage just like the rest of us. These highly priced home loans are known as Jumbo and Super Jumbo Mortgages.

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

Jumbo mortgages are also known as non-conforming loans because they do not comply with FHA underwriting loan limits that are set each year. Fannie Mae and Freddie Mac agencies purchase the majority of mortgage securities from the original loan lenders.

They have a upper limit on the maximum dollar value of each mortgage they will buy that complies with the FHA underwriting mortgage limits. In 2006 it was raised to $417,000. Insurance companies and large banks normally help to finance the excessive mortgages like Jumbo and Super Jumbo mortgages that can go up to six million dollars.

Jumbo and Super Jumbo mortgages commonly have somewhat higher interest rates than that of a normal mortgage. Interest rates on these non-conforming loans may 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 a form. Afterwards up to four lenders will reply with their best offer. Filling out this form does not require your social security number. It is also not an application for credit, but connects you to the top mortgage lenders that serve your area.

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

The 80-20 Mortgage Loan

Many people do not have the down payment for homes. They are stuck paying a monthly rental fees and unable to save efficiently for a down payment. There are loans out there to accommodate those individuals who can’t afford to make a down payment.

The 80-20 loan is a mortgage loan that requires two mortgages. One of the mortgages is for 80% of the principle and the other loan is for twenty percent of the loan. The twenty percent loan is also known as a piggyback loan.

The 20% interest rate is commonly a little higher than the 80% loan amount. You can even opt for the interest only on the twenty percent loan to lower the monthly payment.

The 80-20 home loan also exempts the borrower from having to pay the private mortgage insurance or PMI. PMI is needed for any home loan that is over 80% of the value of the home. The 80% mortgage and 20% loan added together is still usually cheaper than one mortgage loan with the PMI insurance. Also home loan interest can be written off on taxes, but not PMI insurance, so the borrower would also be coming out ahead there. Mortgage companies and lenders set up these loans several different ways.

Because the 20% loan is viewed as an equity line of credit it should be refinanced every three to five years. You should compare lenders to learn of the different methods that are used to finance the two mortgage loans and which is the best choice for you.

80-20 loans can help many people. While it is usually popular with those people who do not have the savings for the down payment, it can benefit those who do have the funds, but do not want to dip into their savings or investments. The only money that is due up front by the borrower is the closing costs.

Mortgage – Loans Qualifying

You’ll need to meet a list of qualifications with any type of mortgage loan you apply for. Home mortgage lenders want to make sure they’re going to get their funds back before lending money to a potential customer. There are a couple key qualifications that lenders will have access to find out if you’ll need to qualify for a home loan.

One of the main qualifications is credit history. What’s your credit rating? Do you have any accounts that are presently in default or have you had late payments on any other loans or accounts within the past twelve months?

What’s the amount of outstanding revolving credit (credit card balances)? They use credit checks to help gauge the likeliness that you’ll pay the loan back on time.

All these variables plays a factor in determining if you will get a loan and what kind of interest rate you get. Bad credit can result in not qualifying for a loan or getting a high interest rate because the lender sees you as a high risk investment.

The other major qualification is employment. Are you currently employed? They find out how long you’ve worked, how stable your current job and income are. Your employment information to evaluate your ability to pay off the loan.

An individual who shows a record of numerous job changes with short durations and periods of unemployment between each will be evaluated as someone who is unlikely to have the funds to pay the monthly payments. Whereas someone who has been employed with their current profession for several years and makes a set income shows the ability to make monthly payments on time.

To help expedite your mortgage loan process quicker it would be helpful to have some documents ready such as pay stubs, verification of employment and length of employment. Be ready by checking your credit history in advance to make sure you’ve taken care of any delinquent accounts or things that might cause problems and that everything is correct on your credit report.

Prime and Sub Prime Mortgages

There are two different lender markets, prime and sub prime mortgage lenders. Unfortunately it’s hard to identify these markets from one another except that sub prime mortgage lenders are usually higher than prime mortgage lenders.

Sub prime lenders usually will qualify borrowers that prime lenders turn away. Some lenders offer both prime and sub prime mortgages and usually have the best option because they’ll first try to get the loan autorized for a prime mortgage loan before a sub prime mortgage.

A sub prime lender bases its rates similar to that of a prime lender in accordance to credit ratings, history and the amount of the downpayment. But unlike prime lenders, sub prime lenders aren’t required to carry escrow on loans to cover hazard and fire insurance premiums, mortgage insurance premiums and property taxes.

Sub prime lenders normally will have higher interest rates and fees because they take on a risky market. More sub prime loans falls into foreclosure than those of prime loans. They also have to charge higher fees and interest because more of the applications are processed and doesn’t meet qualification and marketing costs are typically more for sub prime lenders.

Although sub prime lenders benefit borrowers who won’t get accepted for prime loans, that can be a disadvantage to borrowers who do qualify for prime loans. The best way to avoid this is to check with several lenders. Don’t be quick to jump on the first one that makes an offer, especially if they aggressively marketed the loan to you.

Many sub prime lenders are aware that borrowers qualify for prime loans, but these lenders work on a commission and will process a prime borrower for a sub prime loan. It’s up to you, to make certain you don’t get fooled and wind up paying more on interest rates and your home loan.

Should You Get A HUD Home?

The Department of Housing and Urban Development (HUD) is a governmental agency that heads another agency, the Federal Housing Administration better recognized as the FHA, which was produced to lower the restrictions and costs for first time home buyers.

When lenders are forced to foreclose on FHA properties, HUD normally pays off the home loan and keeps ownership of the property.

The Department of Housing and Urban Development then takes the house and sells them in a auction type process. They determine the beginning price from a professional estimation of the value of the home. The home is marketed for 10 days and only occupied owners may bid during this time.

After this time investors may begin placing bids on the home until HUD finds an attractive bid is made which is determined on the opening bid date. HUD homes usually sell above the starting price that was established by HUD to begin the bid.

In some regions an earnest money deposit is needed. The amount can vary depending on the location, but can amount up to fifty percent of undeveloped land. This deposit must be made in the form of bank checks, cashiers checks, or money orders, which are all certifiable.

FHA loans requires you to finance ninety seven percent of the homes value that’s obtained through a HUD bid. This means that the buyer is responsible for the difference between the bid and the homes value plus the three percent required for the down payment.

HUD homes are attractive because there’s a lot of room for negotiation and the opportunity to make a profit off of the purchase. You can find these properties on the Web by management companies that are contracted by HUD to manage the properties. HUD homes are normally available at discounted prices to certain professions such as police officers and teachers as well as non-profit organizations.

Debt Consolidation Mortgages

The debt consolidation mortgage is a loan that’s most beneficial for those individuals who have equity built up in a home and would like to refinance their monthly debt into one low monthly payment by their loans when refinancing their mortgage.

The advantages of consolidating all of your loans into your mortgage is for one, you can save money on interest. Most revolving credit has high interest rates. People also fall into the trap of paying the minimum balance due (most of which is interest) and are unable to lower the debt hence the title of revolving credit.

It’s also beneficial because you don’t have to make payments to several different creditors. It also eliminates having numerous open accounts on your credit report, which can
clear up your credit some and put you at a improved credit rating.

The main caution you should consider in consolidating your debt into your mortgage is that you jeopardize losing your home through a foreclosure if you can’t make the payments. The payment increase will depend on the amount of debt that you refinanced back into your mortgage loan. Also take into consideration that consolidating your debts into your home loan deducts from the equity you have in the home.

Make sure that the home equity loan doesn’t eat up so much of the equity that if the real estate market slightly decreases it puts your home mortgage over the current market value of your home

For the most part a debt consolidation mortgage benefits will outweigh its disadvantages for the responsible home owner. If you’re interested in refinancing your debt into a debt consolidation mortgage loan you should contact a lender to find out if this program is right for you.

Choosing a Mortgage Loan

There are advantages and disadvantages to every type of mortgage depending on your goals as a homeowner. Below are a few major keys to consider when deciding what mortgage is best for you.

If you plan to remain in your home for ten years or more your best option may be the Fixed Rate Mortgage. Fixed rate mortgages are loans that are amortized into equal payments within the life of the loan. There are no rate fluctuations and therefore the monthly payments never change.

On the other hand if you plan to sell your home before ten years you may want to consider an Adjustable Rate Mortgage. The initial rate of an adjustable rate mortgage is usually lower than that of a fixed rate mortgage to make it attractive because of its risk of fluctuating rates. Buyers who only plan to owner their homes in the short run or less likely to be hindered by the risk associated with fluctuating rates and usually benefit from the initial discounts that ARM offer.

If you plan to move in less than five years and expect the value of your home to increase tremendously than you may want to consider an Interest-Only Mortgage. This type of mortgage is just that, you only pay the interest of the loan along with any taxes and insurance associated with the costs of owning the home. When the owner sells the home in a couple of years, the increased home value should pay off the home loan and then some.

Interest Only Mortgages are beneficial because of their low monthly payments but it can be risky because the borrower is strongly depending on the foresight that their home will significantly increase in value in a short period of time.

The most common form of home financing, especially for first time home buyers and individuals on fixed incomes, is the fixed rate mortgage because of its predictability. To determine which loan is best for you, you should contact a loan officer or discuss your goals with a credit counselor.