As the market for homes in metro Milwaukee – high-end properties included - remains competitive, the topic of jumbo mortgage lending has been a popular one. The world of jumbo financing remains specialized and, to some, a bit of a mystery. To help demystify the process for both new and experienced jumbo borrowers, here are five things to know about jumbo mortgage loans.
What makes it a jumbo loan?
The current “conforming” loan limit for a single-family (primary or second) home in Wisconsin is $417,000. A jumbo mortgage is often necessary for loans in excess of that figure. Like other mortgages, jumbo loans come in the form of both adjustable and fixed rates, which are often slightly higher than their conforming brethren. When a borrower needs slightly more than the $417,000 limit, a “piggy-back” option might make sense, where the bank provides a smaller second loan to make up the difference.
How is the jumbo mortgage process different?
The market for high-end homes can be inherently more risky because of fewer potential buyers. As a result, values are subject to greater swings, requiring more conservative underwriting, especially by national lenders. Local lenders like Great Midwest Bank take pride in understanding specific sub-markets throughout the area, typically resulting in less underwriting scrutiny.
Are the interest rates and costs for a jumbo mortgage higher?
In recent years, the market for jumbo loans has become more competitive. The key is that the borrower and the property being purchased must fit neatly into a uniform group of other similar borrowers. While rates and fees for these types of loans have dropped to something similar to the smaller, conforming loan market, keep an eye on the requirements – strings are sometimes attached.
Can I use a jumbo loan for new construction or a major home renovation?
Absolutely – both are very popular uses of jumbo loans. Select jumbo mortgages can help bridge the gap as you remain in your current home during construction of a new home. And it’s been a vehicle to combine an existing loan with financing for a major remodeling project.
Does a jumbo loan require a larger down payment?
Not necessarily. At Great Midwest Bank, we historically have offered only our portfolio jumbo loan product with an adjustable rate. It’s a popular option because of the flexibility of our local underwriting requirements, and in some circumstances, a lower down payment via private mortgage Insurance. In addition, after closing, our portfolio loans of all sizes are serviced right here in Wisconsin.
It’s a safe bet that the larger, national programs for fixed rate jumbo loans (one of which is now offered by Great Midwest Bank) generally require a larger down payment. The product provides the security of a longer term fixed rate but requires stronger credit and income history.
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