A Brief Introduction To Jumbo Loans
Jumbo loans are commonly also referred to as non conforming loans
. These loans can take the form of a commercial or residential mortgage loan that does not conform to the guidelines as set out by Fannie Mae and by Freddie Mac, which are part of the Federal National Mortgage Association. The recent housing boom drove home prices north and this has meant that people that wished to purchase a home were forced into looking for the best way to finance their purchases which in turn led them into looking at the benefits of non conforming loans.Some homes are so expensive that their prices can give home buyers a real shock but with the help of jumbo loans it is possible to buy even the most exorbitantly priced home. This loan is one that is an amount that is above the limits and guidelines that have been set out by both Freddie Mac and Fannie Mae. Furthermore, each January a new limit is set out for conforming loans and these limits are what affect the amount of money that becomes available through jumbo loans.
Furthermore, the lower rates of interest today have made jumbo loans more attractive and in fact more money too is currently being pumped into these mega loans. Add to that the fact that more numbers of qualified borrowers are entering the mortgage market and even banks are becoming interested in mega loans and along with drop in prices of luxury properties, now is the time to take advantage of mega loans.
These mega loans allow people that have been delaying the purchase of a home because of various reasons can now go ahead and finance a home purchase. Whether you are interested in purchasing a home in the mountains or out on a Hawaiian beach or a swank apartment in New York, it is now easy to purchase these properties by getting the required finances via a non conforming loan.
Non conforming loans are generally sold and purchased on a smaller scale as compared to conforming loans and they also invite a higher rate of interest as compared to conforming loans. This is because such loans pose a greater risk to the lender since if the borrower defaults, it becomes a lot more difficult for the lender to sell a luxurious home for its full price.
This is why lenders that offer non conforming loans will ask the borrower to pay more by way of down payment. This is because jumbo homes are priced in a more subjective manner and these homes are also not all that easy to sell which is why lenders need to undertake two different appraisals on their jumbo mortgage loans.
by: William Wilson