A Jumbo Mortgage Loan is a mortgage which surpasses the conventional loan limits. The congress sets the conventional loan limit for purchase every year. Last 2005, the conventional loan limit was set to $357,650. As of 2006, the conventional loan limit was set to $417,000.
The Fannie Mae and Freddie Mac which are two federal chartered organizations purchases mortgage from mortgage originators. Then, Fannie Mae and Freddie Mac transform the mortgage to securities, and sell the securities to investors. The funds from sold securities are invested for new mortgages. And, the cycle goes over and over. This cycle provides a continuous flow of affordable funds.
Since the Jumbo Mortgage Loan is higher risk for mortgage lenders, the mortgage lenders give a slightly higher interest rate on Jumbo Mortgage Loan. Usually, the real estate agents find the luxury real estate property harder to sell.
Lately, the house prices shoots up to the roof. So, the demand for Jumbo Mortgage Loan shoots up as well. That is why the conventional loan limit shoots up two years in a row.
Mortgage Lenders requires higher down payment with Jumbo Mortgage Loan. There are no down payments permitted of any sort. Furthermore, the down payment for jumbo mortgage loan requires five percent more than conventional mortgage loan.
Fortunately, the mortgage lenders now offers longer mortgage. Many borrowers opt for 40 year mortgage or 50 year mortgage to bring down the mortgage payment. The Longer mortgage lowers the mortgage monthly payment.
Another, the borrowers use interest only mortgage to bring down the mortgage payment. In interest only mortgage, the borrower pays enough to pay off the interest. Thereby, the amount owe stays the same until the end of interest only mortgage. Interest Only Mortgage does not last forever. Sooner or later, the borrower pays off the mortgage.
The stated income and balloon rate jumbo mortgage loan are also popular. The stated income cost less to the borrower. And, any borrower with excellent credit can apply for the mortgage loan. Thus, there is no need to verify income.
As for balloon rate jumbo mortgage loan, the borrower pays equal amounts on each period. At the end, the borrower pays lump sum payment to pay off the mortgage.
In finding for jumbo mortgage loan, the borrower must compare interest rate from a variety of mortgage lenders. Then, the borrower evaluates his financial situation and loan needs. After, the borrower looks for trusted mortgage broker thru friends, family, classified ads, business directory, and more. Next, the borrower checks if he needs to pre-qualify for the loan. Finally, the borrower applies and completes the application.