Frequently Asked Questions
1-800-JUMBO-LOAN™
Q: What is a jumbo loan?
A: A jumbo loan is a loan for an amount of money that surpasses the usual loan limit the limit for a conventional loan is currently $ 417,000.
Q: How does the interest rates for jumbo loans compare to conventional loans?
A: The interest rate on a jumbo loan is generally much higher than a conventional loan because the risks to the lender are higher. jumbo loan interest rates are usually between .25% and .5% higher, and have jumped as high as 1% higher during times of housing turmoil or high investor anxiety. Other causes that determine the interest rate include property types and mortgage amounts.
Q: Do jumbo loans require a down payment?
A: Lenders often do require a higher down-payment on a jumbo loan, generally an additional 5%, in an attempt to alleviate the high risk they assume by carrying the loan.
Q: Can you refinance a jumbo loan?
A: Yes, but many avoid doing so because of the expense involved with repaying the closing costs. Some lenders offer an extension and consolidation agreement, so those who want to refinance will not have to pay the mortgage tax again on the same principal balance. For those who do choose to refinance, title insurance companies sometimes offer up to a 50% discount (often required by law for those refinancing within 1 year to 10 years, the largest discount coming during the 1st year).
Q: Do jumbo loans require a down payment?
A: Yes. In fact, lenders often require a higher than usual down-payment on a California jumbo loan, in order to alleviate the risk they assume by carrying a loan for a high-end or luxury home.
Q: Are jumbo loans only used for 2nd homes?
A: Jumbo loans can be obtained no matter how many homes you own. In, fact many big cities and their surrounding suburbs require a jumbo loan because of the steep rise in housing prices. To make these loans more affordable, some lenders offer a 40 or 50 year repayment option. Others give borrowers the option of making interest only payments, allowing borrowers to purchase homes that would have been otherwise impossible to afford.
Q: Do I have to maintain Private Mortgage Insurance (PMI) on a jumbo loan?
A: Jumbo Loans don’t always require you to maintain a PMI. There are ways to avoid paying PMI. PMI is only required for those who borrow more than 80% of the value of their home. As long as the Loan to Value ratio is under 80%, PMI is optional. Many choose to split the mortgage into two parts, borrowing 80% with a jumbo loan and borrowing the rest with a higher interest 2nd mortgage. This alleviates the need for PMI on the primary/jumbo loan.