Jumbo Mortgage Loans
The average price of a home in the United States is right around 300,000 dollars. When you apply for a mortgage to purchase a home around that average price, the general rules of mortgage loans apply. But what happens when the price of the home you want to purchase far exceeds the typical home price? Jumbo Mortgage loans are offered by banks for homes that exceed a certain price limit.
These types of loans are considered a lot riskier than regular mortgage loans. Most people needing this type of loan are purchasing high-end luxury homes. These types of homes are detailed and have often been custom built. This makes them a lot harder to sell. Generally, people who are looking to spend that much money on a home want to customize one to their own liking.
Banks understand that the harder a home is to sell, the greater the likelihood that they will get stuck with a home in foreclosure if the borrowers ever default on the loan. Banks absorb some of the risk involved in financing these expensive homes by attaching specific rules to the loans.
Jumbo mortgage loans are offered only when the borrower can put down a large down payment on the home. Twenty percent of the cost of the home is usually considered a good down payment for a regular mortgage. But twenty percent usually isn't even enough when purchasing a high priced home.
Borrowers are required to put down a large down payment if they want to qualify for a jumbo mortgage. This way, even if the home loses value, the bank can still recoup some of that cost if the borrower defaults on the loan because they have the down payments. Depending on the mortgage climate, anywhere from twenty to fifty percent of the cost of the home is required for a down payment.
Closing costs on the loans are very high as well. Overall, this type of mortgage is really expensive. In the past, these types of mortgages were only needed for high-end luxury homes, but in recent years, housing prices have skyrocketed. Many people in areas like California and Washington D.C. were forced to become jumbo borrowers even though they were buying a modest home.
In February of 2008, as part of a stimulus package, President Bush signed off on temporarily increasing the jumbo mortgage limit to 729,750 dollars. This was an increase of 125 percent more than what the typically jumbo limit had been.
For those of you who have expensive taste and want to own an expensive home, realize that you will have to take on a jumbo mortgage in order to purchase the home.
These types of loans are considered a lot riskier than regular mortgage loans. Most people needing this type of loan are purchasing high-end luxury homes. These types of homes are detailed and have often been custom built. This makes them a lot harder to sell. Generally, people who are looking to spend that much money on a home want to customize one to their own liking.
Banks understand that the harder a home is to sell, the greater the likelihood that they will get stuck with a home in foreclosure if the borrowers ever default on the loan. Banks absorb some of the risk involved in financing these expensive homes by attaching specific rules to the loans.
Jumbo mortgage loans are offered only when the borrower can put down a large down payment on the home. Twenty percent of the cost of the home is usually considered a good down payment for a regular mortgage. But twenty percent usually isn't even enough when purchasing a high priced home.
Borrowers are required to put down a large down payment if they want to qualify for a jumbo mortgage. This way, even if the home loses value, the bank can still recoup some of that cost if the borrower defaults on the loan because they have the down payments. Depending on the mortgage climate, anywhere from twenty to fifty percent of the cost of the home is required for a down payment.
Closing costs on the loans are very high as well. Overall, this type of mortgage is really expensive. In the past, these types of mortgages were only needed for high-end luxury homes, but in recent years, housing prices have skyrocketed. Many people in areas like California and Washington D.C. were forced to become jumbo borrowers even though they were buying a modest home.
In February of 2008, as part of a stimulus package, President Bush signed off on temporarily increasing the jumbo mortgage limit to 729,750 dollars. This was an increase of 125 percent more than what the typically jumbo limit had been.
For those of you who have expensive taste and want to own an expensive home, realize that you will have to take on a jumbo mortgage in order to purchase the home.
About the Author:
Sarah's work helps people to find mortgages with bad credit and to secure equity type home loans for people with bad credit.
posted by Credit Counseling at
4:04 PM
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