How To Secure A Jumbo Loan

By Mitch Reynolds · Leave a Comment

These days, it can be very difficult to secure a jumbo loan. However, for many people a jumbo home loan is the only option they have (or think they have) if they want to purchase the home of their dreams. In this post I am going to discuss a few strategies that you, as a consumer, can follow in order to secure the home of your dreams.

First, as I’ve mentioned previously, it’s important to understand what a jumbo mortgage is in order to not be taken advantage of. Sadly, the days of simply trusting your jumbo loan mortgage broker are gone—you need to do as much research as possible before you speak with your lender. For those of you without a lot of background in these loans, check out my post on jumbo loans.

Second, determine the value of loan that you need, and compare that with the current jumbo conforming loan limits. The current jumbo loan limits 2010 are $417,000 for ‘normal’ areas. If the vale of loan needed is close to this limit, then you may want to find a way to get the loan value down below the conforming limits. By doing so you may save yourself thousands and thousands of dollars over the life of the loan. Here are a few tips on how to decrease the jumbo loan interest rate:

• Check to see if your address qualifies as a ‘high cost’ area for jumbo loans. You can find this out by going to Fannie Mae and clicking on the ‘loan limit geocoder’. This tool will allow you to check by address the amount allowed under the current limits. You should always do this first, as the limit for your home may be as high as $729,000.
• Put down a higher down payment. Some people have found it advantageous to pay even $200,000 or more towards their home in cash up front in order to be eligible for a conforming loan. However, if you decide to go this route, be sure to not take the money from other areas that may be earning higher rates of return. For example, don’t pull your retirement money out of your 401K if the rate you are earning in your 401K is higher than the jumbo loan rate (and remember to use the after-tax jumbo loan rate when doing this calculation)
• See if your lender will allow you to take out an 80/20 jumbo loan. This is actually two loans – one for the home, at conventional rates, and one for the ‘down payment’. This type of loan may be difficult to get if you don’t have the best credit/income, but can be very beneficial even though the interest rate on the ‘20’ part of the loan will be higher. Just do the math and make sure it makes sense, but it generally does.

Also, remember that these strategies can also be used for a jumbo loan modification, and you can also talk to your lender to see if they have any other ideas.