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Qualifying For A Jumbo Loan

In today’s tough economic environment people are looking for unique ways to save some money. One way that can drastically help increase cash flow is to refinance the mortgage for a lower rate. Jumbo loan rates are still at historically low levels and serve as a great incentive to refinance. Because jumbo mortgage rates are low now does not mean that they will stay that low. In fact, history shows that once the economy turns around mortgage rates will increase and that is especially true for the jumbo loan rates.

A jumbo loan is a mortgage loan that does not conform to specific guidelines set by the Federal National Mortgage Association (Fannie Mae) or by the Federal Home Loan Mortgage Corporation (Freddie Mac). A jumbo loan exceeds the limit that Fannie Mae or Freddie Mac are willing to buy. Due to this jumbo loans are referred to as non-conforming loans. The minimum size of loan that qualifies as a jumbo loan varies slightly by location, but a common number is $417,000. If a loan is equal to that amount or higher it will be regarded as a jumbo loan.

Currently jumbo loan rates are in the 5 percent range for a fixed rate, but due to market fluctuations can change on a regular basis so one is encouraged to speak with an expert to get the current rate. In many cases people who get a jumbo mortgage will go with an adjustable rate mortgage. The benefit of an adjustable rate mortgage is that the jumbo mortgage rates will be lower than a fixed rate.

Qualifying for a jumbo mortgage will require certain conditions to be met beforehand. Of course this is due to the fact that lenders take on considerably more risk when financing a jumbo loan compared to a more traditional conforming loan. One condition that must be met by potential applicants is proof of income. Gone are the days where all one had to do was state their income, nowadays everything must be well documented. Another requirement must be that the monthly mortgage payment must be no more than 38 percent of the total income before taxes.

Jumbo mortgage rates are low and given the current economic environment it may make sense to take advantage of these lower rates. Knowing what constitutes a jumbo loan and how to qualify for one is a good first step.