So What Is A Jumbo Mortgage

by Nawel K. Seth on February 5, 2012

A jumbo mortgage is, as its name implies, a really big mortgage. To get more specific, a jumbo mortgage is certainly one in which the amount being financed is a lot more than the top amount set with the Government Sponsored Enterprises, or GSE. The GSE is a group of financial companies that is charged with maintaining access to housing loans and lowering the cost of those loans in order that consumers are able to realize the objective of home ownership.

As part of their duties, the GSE sets a maximum guideline amount for the mortgage, which has traditionally been about $600,000.00. If a mortgage is for more than that amount, stage system a jumbo mortgage.

Needless to say, we all know that there are lots of houses that are more expensive than that, so the requirement for jumbo mortgages has been increasing since the price of housing has increased. Not all lenders offer jumbo mortgages, but there are certainly plenty of lenders who do. Generally speaking, a jumbo mortgage carries more risk for your lender because the payments have become high and even wealthy buyers may at some point in the future have financial difficulties which make it difficult for them to meet the money they owe. In addition, high-priced homes generally take more time to sell than do moderately priced houses, therefore a homeowner does fall into hardship, it quite some time to get out from underneath the mortgage loan, so they may have to default around the loan.

Because of the increased risk, many lenders will require a large down payment on a jumbo mortgage. The interest rate can be a little higher than they would be for a mortgage that falls beneath the GSE’s guideline maximum amount. It’s possible for some homebuyers to purchase a home with very little or even no amounts to use as a down payment, but this won’t generally apply to a person who would like to get a jumbo mortgage. Because of these large loans, most lenders require some money down, but in the majority of ways the process for getting a jumbo mortgage is really the same as getting one for a lesser priced home.

If the house of your dreams is a high priced home in an area of the country containing seen dramatic rises inside prices of homes, just understand that there is likely a jumbo mortgage available to you if you have a good credit history and can show your ability to repay the loan. As well, you should be prepared for the fact that the money is probably going to cost you a little more than a smaller mortgage would, not only in terms of the amount you are borrowing, but in addition in terms of what it actually costs you for your privilege of borrowing the funds.

Check out the site Mortgage Calculator.

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