Jumbo Mortgages: What You Need to Know

These days, mortgage lenders are very skeptical about issuing jumbo mortgages to buyers.  However, in states like California where the cost of living is rather high, jumbo loans are sometimes a necessity. If you’re hoping to obtain a jumbo mortgage – know that it while it won’t be easy –it is possible.  

First, let’s understand what a jumbo mortgage or jumbo loan is.  A jumbo mortgage is essentially a home loan that is above the industry-standard definition of conventional conforming loan limits.  The standard is determined by Fannie Mae and Freddie Mac, the two largest lenders in the United States.  A jumbo mortgage is a non-conforming loan because it is large. 

The Federal Housing Finance Agency (FHFA) reports that in October of this year, U.S. Congress agreed to keep the current conforming loan limit of $417,000 through 2010.  In areas that are considered high-cost, like the state of California, the limit is $729,750. 

As you can imagine, obtaining a jumbo mortgage is not easy.  This is due to the fact that these types of loans are very risky for lenders for numerous reasons.  However, that main reason is that if homeowners default on their mortgage payments, it would be very difficult for lenders to sell an expensive home at full-price, especially in today’s real estate market.  Due to the risk involved, most lenders will proceed with caution when agreeing to jumbo loans and will often charge larger interest rates than they would on conforming loans.

Do You Need a Jumbo Mortgage?
Before you start panicking and thinking that you will never have your dream residence, you should decide whether or not you really need a jumbo mortgage.  In Amy Hoak’s article “The Return of the Jumbo Mortgage”, written for the Wall Street Journal, she writes, “As home prices have fallen and the U.S. has raised loan limits in some areas, more home buyers probably need conforming mortgages.”

It isn’t always easy for prospective buyers to know which types of home loans are ideal for their individual situations.  For this reason, home buyers should think about working with a Certified Mortgage Planning Specialist (CMPS) that is local.  Certified Mortgage Planning Specialists, like the San Diego professionals at Catalyst Direct Funding, can advise people on the differences between a conforming and non-conforming loans, help them determine if they need jumbo loans and provide assistance with obtaining home loans from lenders at fair rates.

If you would like to speak with one of our San Diego Certified Mortgage Planning Specialists, do not hesitate to contact us today!