What Exactly is a Jumbo Loan?
If you have spent anytime looking into home loans or mortgage rates, you most likely have heard mention of something called a “Jumbo Loan.” It’s easy to guess that a jumbo loan is a mortgage loan for a large amount of money; however, there are some details about Jumbo Loans to keep in mind if you are in the market to purchase or refinance a higher-end home.
So what makes it a Jumbo Loan?
The current “conforming” loan limit for a single-family (primary or second) home in Wisconsin is $417,000 and is set by Fannie Mae. When a mortgage goes beyond that amount, it enters the category of a Jumbo Loan. Like other mortgages, Jumbo Loans come in the form of both Adjustable and Fixed Rates, which are often slightly higher than their conforming brethren.
What makes it different than a conforming mortgage?
The market for high-end homes is inherently more risky because of a limited number of potential buyers. As a result, property values are subject to greater swings, requiring more conservative underwriting requirements.
Because of this higher risk, the average Jumbo Loan borrower has a better credit history, more stable income and higher reserves (cash on hand or other assets that can be accessed, even retirement accounts) than a Conforming Loan borrower.
Jumbo Loans at Great Midwest Bank
At Great Midwest, we most often used our Portfolio Loan product with an Adjustable Rate in this circumstance. It’s a popular option, in part, because of the flexibility of our local underwriting requirements and, in some circumstances, a lower down payment via Private Mortgage Insurance. After closing, all of our Portfolio Loans are serviced right here at home in Wisconsin.
More recently, Great Midwest Bank added a Fixed Rate Jumbo Loan option. The product provides the security of a longer term fixed rate but generally requires a higher down payment and stronger credit and income history. In some cases, two appraisals may be required.
One final note; In a situation where a borrower needs only slightly more than the $417,000 conforming loan limit, Great Midwest Bank may opt to provide a small second lien mortgage to make up the difference. Your Loan Officer can provide details.
Are you ready to learn more? Contact a loan officer in your location today!