A Jumbo Mortgage

A jumbo mortgage is classified as jumbo simply because it goes over and above the conforming loan limits in Utah. Jumbo mortgage programs are also referred to as non-conforming mortgages or a high-risk loan, simply because the loan amount is rather large and it has a higher interest rate. These jumbo mortgage loan amounts are typically anywhere from $417,000 or more, and are generally available from a lender that specializes in them.

Conventional lenders do loans that are not considered high risk, so they won't do a loan above $417,000, but can be re-evaluated if the property is in a "high-cost" zip code. These loans get their label as conforming loans because they conform to the underwriting guidelines that Fannie Mae and Freddie Mac have set forth. This is also where the term "mortgage backed securities" comes from, because these loans are securitized on Wall Street. Due to changes in the economy, Fannie and Freddie Mac have made their guidelines more stringent, asking for more thorough documentation and more cash reserves from the borrower.

Governing the Jumbo Loan

Once jumbo mortgage limits are set, conventional loan limits can also be re-evaluated to ensure that they are balanced. These limits are set so that the proper interest rates are being charged, and the proper guidelines are being followed according to the type of loan the borrower is getting. Loan limits were evaluated when property values were skyrocketing, but now these loan limits are not as prevalent due to the economy. In fact, many of the properties that were purchased using a jumbo mortgage program, had dropped in value so significantly that many were able to buy these homes either as short sales with a conventional loan or with the help of Fannie Mae.

Jumbo loans are available with fixed or adjustable rates, and some lenders also offer low down payments and interest only options in Utah. Jumbo mortgage programs that have fixed rates offer terms anywhere from 10 to 30 years, but the 30 year is usually the most common choice to keep the payments as low as possible. Adjustable jumbo mortgages are designed with those in mind who want the initial lower payment, and know that they may be making another change within a few years time. Adjustable mortgages can be set up for a 3, 5, or 7 year term, and if you aren't sure which one is right for you, be sure to ask your mortgage professional.

Where do you find Jumbo Loans?

Jumbo mortgages, like conforming mortgages, are sold by banks, credit unions, mortgage brokers and other companies. However, many lenders do not deal in them or impose very restrictive loan-to-value, credit score and property requirements. That's what makes finding jumbo or super-jumbo financing so much harder than getting a conventional mortgage. Here are two great places to find jumbo mortgages:

1.Mortgage brokers: Mortgage brokers have access to many programs and can do a lot of the legwork for you. A good broker not only knows where the programs are, but also can tell you which lenders offer the best rates and are most likely to approve your application, "While your loan may not qualify with one lender, it could be fine with another. Jumbo loans are much more difficult to close than traditional loans. Because jumbo loan program guidelines vary more than conforming loans, it is often the little details that rear their ugly head and cause problems." Work with a jumbo mortgage specialist to dodge pitfalls.

2.Local real estate agents: Local agents who list a lot of high-end homes know who finances them and who does a good job. Understand, though, that a real estate agent's priority is that the mortgage gets approved and closed quickly. They are less concerned about who offers the best rates.

The Z Mortgage Team are the mortgage experts for jumbo loans in Utah including Salt Lake, Park City and St. George. Contact us if you have questions about jumbo loans and how they work. Monday's post will go into detail about how to refinance a Jumbo Mortgage, so make sure to check that out.