Unless Congress steps in to object, the maximum FHA, Fannie Mae, and Freddie Mac conforming loan limit will drop to $625,500 beginning Oct. 1, 2011. The current maximum amount for a conforming loan is $729,750, although the majority of counties will fall far below the new $625,500 maximum.
Cutting back those loan limits is a big deal, says Kenneth Harney in the Los Angeles Times. Because it means that big banks will need to step up to the table to handle jumbo loans. Many banks have shied away from jumbo loans in recent years. Will jumbo loans be a hot ticket again? Bank of America reportedly funded $4.1 billion in jumbo loans the first quarter of this year alone. Weirder things have happened.
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At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.
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Benefits of Jumbo Loans may include:
Way to finance a huge loan without a paying a big amount upfront.
Jumbo loans increase your credit faster than a traditional loan. Since jumbo loans typically have a higher rate of default than a typical loan, if you pay your jumbo on time your credit score will reflect your good financial practices. This will make it easier to get a loan for anything else you may want in the future.
A bigger home, better credit, and less down are just some of the attractive aspects to getting into your non traditional loan.
Although jumbo mortgage loans come with much higher monthly payments, they still offer much of the flexibility of a regular loan. You can take out a jumbo loan with a fixed rate, or if you are planning to refinance or anticipate that rates will go down, you can take out an adjustable rate
mortgage. A jumbo loan doesn’t require that much more paperwork than a regular loan and closing costs tend to be about the same. And just because you are applying for a jumbo loan doesn’t mean everything will take longer – in general, the time taken to close the loan will be about the same.
A jumbo loan can potentially be refinanced with less than 20% equity, depending on the rules in your state – some jumbo loans even allow up to 97.75% financing. In some parts of the country, jumbo loans are available as FHA loans, which allow a cash-out refinance for up to 80%; FHA jumbo loans also have the benefit of being available with a
lower down payment. Although interest rates in general tend to be higher for a jumbo loan, lenders can sometimes reduce the effects of this by breaking the loan up into two separate loans.