You may have heard of the term jumbo mortgage loan and wondered what it means. Well, in this short article I will take you through the meaning and why it is important for you to understand it.
In basic terms, if a mortgage loan exceeds a certain amount, it is considered a jumbo mortgage loan. Currently (as of 2018), a jumbo mortgage loan is a loan more than $453,100. The limit typically changes each year. In 2017, the amount was $424,100.
The great part about a jumbo mortgage loan is the approval process is the same for conventional loans for most lenders. Unfortunately, the interest rate for a jumbo mortgage loan is typically 1/4% higher than a conventional loan but this does vary and the difference seems to be less year after year.
Since brokers are typically compensated based on the amount of the loan and a jumbo mortgage loan is a larger amount than a conventional, you should feel comfortable negotiating the loan rate with your broker or lender. I am amazed that people will negotiate a $100 tire purchase but will fail to ask the broker compensation on a $1,000,000 loan. A good mortgage broker is happy to discuss fees and in most cases appreciates it. This way there are no surprises or concerns after escrow closes.
Anytime you start the loan process whether refinancing or purchasing a home, I recommend the following steps:
1) Review current mortgage rates on the internet and get a feel for the current market. Interest rates change frequently so this step just gives you an idea. When looking over rates make sure you are reviewing jumbo mortgage loan rates as there is a rate difference.
2) Assess your loan needs and the amount you think you need
3) Ask family or friends for a reference of a mortgage broker
4) If you cannot find a referral, you should proceed cautiously and develop a list of questions for your prospective mortgage broker.
5) Questions you should ask include: how long have you been doing mortgage loans, are you full-time mortgage broker, how do you price your jumbo mortgage loans, and what education do you have. Asking these questions will give you a good first impression of the mortgage broker.
6) Determine if you need to pre-qualify for a loan
7) Complete the loan application thoroughly and accurately
If you work with an experienced mortgage broker, the process will be very painless as the mortgage broker will anticipate problems and deal with them proactively.
If you follow the steps in this article, you are well on your way to getting a great jumbo mortgage loan and will build a long-term trusting relationship with a mortgage broker.