California Jumbo Home Loan

Jumbo Home Loan - Getting home financing for a jumbo home loan is not always easy. The perameters and lending guidelines become more strict- assuming the borrower has more of an ability to afford a larger home mortgage than the typical home owner.

Jumbo loans have the same lending options as your conforming loans in regards to interest only, fixed rates, payment option arms, amortizing arms, and 100% financing.

Jumbo loans have different underwriting guidelines than the conventional loans do. The reason for this is that jumbos have to be packaged and sold differently in the secondary market. Investors in the secondary market want to protect themself from default on such large loan amounts.

With a jumbo mortgage loan a borrower is going to pay a little bit higher interest rate than with a traditional conventional loan. Once a Loan exceeds the limits that are set by Fannie Mae and Freddie Mac, which is $417,000 as of 2006, the loan is considered a jumbo loan.

While a jumbo loan may have a slightly higher interest rate and different underwriting criteria there are many options including subpime loans available even with lower credit scores.

Jumbo loan guidelines will usually require more in the area of assets or cash reserves than their conforming counterparts. Many borrowers use 401K accounts or other retirement accounts to satisfy these reserve requirements.

When the Jumbo loan amount is only a little higher than conforming loan limits, one can avoid pay the higher Jumbo interest rate by dividing the loan amount into two mortgages, one within the conforming limit and a second mortgage to make up the difference.

The reason that the interest rate is higher on jumbo loans, is because of the chance of default. The more money that the lender has invested in one particular property, the more risk that they also have invested in that property. More risk also equals a higher interest rate.