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Searching for a Jumbo Loan

In order to get a loan for over $417,000, you have to find a jumbo loan. Some of the obstacles I ran into while trying to find a jumbo loan were concerning jumbo loan rates, jumbo loan limits, and the down payment.

Because jumbo loans are a bigger risk for lenders, it is to be expected that interest rates are higher than conventional loans. I was pleasantly surprised because the jumbo loan rates seemed relatively low. I could get as low as 2.75% on a 5/1 ARM, and as low as 4.25% on a 30 year fixed loan. However, even though these rates seem low, they are actually high concerning the end payment of interest. Because the selling price of the home is actually higher than a conventional loan, this increases the interest cost, even though the interest rate seems relatively low. The 5/1 ARM would be a bigger risk, so the interest rate is much lower at the start. The 30 year fixed would give me much more security and certainty, knowing that my rate will never increase. However, I would choose one over the other based on what I was doing with my purchase. Is it a long-term or short-term investment?BR/>

Another trial I had to face was the jumbo loan limits. The federal government has stated that the loan limit on a conventional loan is $417,000 in most states. However, the limit tends to vary by county because lenders see it as an abstract or suggested limit. My problem with the jumbo loan limits was that I didn’t want a higher interest rate just because I was buying a home for more than $417,000. Most banks do want to adhere to the federal loan limit standard because it makes them more money. However, lenders can make their jumbo loan limit even lower. So even if you need a loan for $416,000, you will still have to pay the jumbo loan rates.

Some lenders offer jumbo loans with 3.5% down. Some lenders require as much as 25% down, which is difficult to swallow. Overall, the limits, rates, and down payment are what make getting a jumbo loan difficult.