The Facts On Jumbo Mortgage Loans
The average price of a home in the United States is right around 300,000 dollars. When you apply for a mortgage to purchase a home around that average price, the general rules of mortgage loans apply. But what happens when the price of the home you want to purchase far exceeds the typical home price? Jumbo Mortgage loans are offered by banks for homes that exceed a certain price limit.
Expensive homes are typically harder to sell. For one, there are fewer buyers that fall into the category of qualifying for a high priced home purchase. Secondly, the people that do fall into that category sometimes have specific ideas about what they want their home to be like.
Since the homes are harder to sell, banks know that if the owner defaults on the loan, there isn't much of likelihood that they'll be able to sell the home, even in foreclosure. Since banks know these homes are high risk homes to finance, banks only offer the mortgages with specific guidelines.
The first thing that is required of the borrower is to put down a large down payment. The typical ten to twenty percent down usually isn't enough to qualify.
Borrowers are required to put down a large down payment if they want to qualify for a jumbo mortgage. This way, even if the home loses value, the bank can still recoup some of that cost if the borrower defaults on the loan because they have the down payments. Depending on the mortgage climate, anywhere from twenty to fifty percent of the cost of the home is required for a down payment.
The final way banks try to absorb some of the risk of the loan by making money is to attach high closing costs to the mortgage. Usually, closing costs are a percentage of the price of the home, so naturally, a high priced home is going to have higher closing costs.
The amount of the loan is high which means they are already making money, but with a higher interest rate, they make even more money. The closing costs are also elevated. This all translates to more money for the lender.
For those of you who have expensive taste and want to own an expensive home, realize that you will have to take on a jumbo mortgage in order to purchase the home.
Expensive homes are typically harder to sell. For one, there are fewer buyers that fall into the category of qualifying for a high priced home purchase. Secondly, the people that do fall into that category sometimes have specific ideas about what they want their home to be like.
Since the homes are harder to sell, banks know that if the owner defaults on the loan, there isn't much of likelihood that they'll be able to sell the home, even in foreclosure. Since banks know these homes are high risk homes to finance, banks only offer the mortgages with specific guidelines.
The first thing that is required of the borrower is to put down a large down payment. The typical ten to twenty percent down usually isn't enough to qualify.
Borrowers are required to put down a large down payment if they want to qualify for a jumbo mortgage. This way, even if the home loses value, the bank can still recoup some of that cost if the borrower defaults on the loan because they have the down payments. Depending on the mortgage climate, anywhere from twenty to fifty percent of the cost of the home is required for a down payment.
The final way banks try to absorb some of the risk of the loan by making money is to attach high closing costs to the mortgage. Usually, closing costs are a percentage of the price of the home, so naturally, a high priced home is going to have higher closing costs.
The amount of the loan is high which means they are already making money, but with a higher interest rate, they make even more money. The closing costs are also elevated. This all translates to more money for the lender.
For those of you who have expensive taste and want to own an expensive home, realize that you will have to take on a jumbo mortgage in order to purchase the home.
About the Author:
Sarah gives meaningful advice that has helped hundreds of people to get mortgage loans for people with bad credit and some other types of bad credit home loans such as home equity loans.
posted by Debt Consolidation Loan at
4:03 PM
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