Posts Tagged ‘Home Loans’
Understanding Super Jumbo Mortgage Loans Rates
If you are looking to buy a home and take out a loan that is much greater than $417,000, then you might be wondering why super jumbo loan rates are higher than both jumbo and traditional loans’ rates are. In this post we will explore a few of the reasons why this is so, and offer some advice on what you can do to possibly lower your rates and help you get a better mortgage loan.
Super jumbo mortgage loans can be a little confusing for several reasons. First of all, many people wonder why they would have to pay higher rates on a higher quality home, especially given that most people looking to purchase such homes make more money and have better credit than the average person. In addition, it’s hard to understand what qualifies as a super jumbo instead of a regular jumbo, as each bank seems to have different cut off limits.
Looking at the different limits, it’s probably best to first understand how jumbo limits are determined. The FHA sets the limit each year, and currently that limit is $417,000 (depending on where you live). If you live in a ‘high cost area’ or outside the continental United States then that limit will be different and you will need to check the FHA website to find out what your limits are. With super jumbos, it’s kind of up to the bank to determine what they consider the cutoff to be. Generally, the limit is $650,000 but some banks will increase that to $1 million.
Looking at the higher rates, there are two basic reasons that they are higher. First, jumbos and super jumbos do not have the backing of the US government. Agencies like the FHA, Fannie, and Freddie can’t do anything with these loans, effectively making them more risky to the banks to generate. Second, it can be harder to sell these homes when they go into default due to lower demand (i.e. less wealthy people moving around alot).
Bottom line – do what you can to get your mortgage below the current jumbo loan and super jumbo loan limits (paying down the mortgage, taking out less, etc.), and you can save yourself quite a bit of money.