Category: Mortgage Lending

What Are Jumbo Loans and What Will They Cost Me?

A jumbo loan (otherwise known as non-conforming) is a loan where the loan amount exceeds the Fannie Mae or Freddie Mac limit.

In Texas, the conforming loan limit is $417,000. In higher cost areas like California, the conforming loan limit is as high as $729,750. Jumbo loan rates in Texas are now lower than the loan rates for conforming loan amounts($417,000).

In the past, jumbo rates were about .50% higher than a conforming loan amount. In my 22 years as a mortgage loan originator, I have never seen the jumbo rates the same or lower than conforming loans. The main reason jumbo rates are so low is because lenders that buy and service these loans want to attract wealthy clients and cross sell them other financial products (like brokerage services) where they can collect ongoing fees.

Given the strict underwriting requirements with all mortgages, especially jumbo loans- borrowers are having to open up their entire financial position in order to qualify and lenders can see what other opportunities there are for opening a brokerage account, life insurance, etc. Also, since the borrowers are taking out a low fixed rate loan, the borrowers are likely to keep their mortgage and won’t be refinancing anytime soon. The affluent client will stay as a bank’s customer for a long time.

Jumbo loans have also become cheaper on a relative basis to conforming loans in part from additional government regulation. The Federal Housing Finance Agency(FHFA), which regulates Fannie and Freddie, has forced lenders to keep additional reserves for potential mortgage defaults on conforming loans. They have increased reserves by charging guarantee fees (GFees) to lenders which increase rates on conforming loans. Since Fannie and Freddie don’t participate in the jumbo loan market, those guarantee fees don’t apply on jumbo loans and therefore are not passed on to borrowers who borrow more than $417,000.

In Austin, Texas, you can still obtain financing with as little as $32,450 down up to a sales price of $649,000. These loans also don’t require private mortgage insurance. You can obtain financing with a minimum down payment of $90,700 on a sales price of $907,000 without mortgage insurance.

We can help you with a purchase or refinance of a jumbo loan in a timely and professional manner. Please call Todd Kurio, Residential Mortgage Loan Originator, at 512 459 2405 or email at todd.kurio@capstarlending.com. Capstar Lending, NMLS #216616