Jumbo Mortgage
A jumbo mortgage in Florida is a mortgage with a loan amount above the industry-standard definition of conventional conforming loan limits which depending on location for year 2008 may be from $417,000 to $729,750. This standard is set by the two largest secondary market lenders, Fannie Mae and Freddie Mac.
Availability
Because Fannie Mae and Freddie Mac do not purchase jumbo mortgages, there is a smaller secondary market resulting in slightly higher rates and slightly larger downpayment requirements. For example, if a 30 year fixed rate mortgage offers 95% financing, the comparable jumbo mortgage may offer only 90% maximum financing.
Jumbo mortgage rates are also higher than their conventional conforming cousins. A conventional 30 year fixed rate mortgage may have a rate of 6.25% while a 30 year fixed rate jumbo mortgage may have 6.50% or higher.
No-money-down programs are generally not available. Private Mortgage Insurance (PMI) is commonly avoided by combining an 80% jumbo mortgage with a 20% second mortgage. This combination is known as a combo loan. A combo loan may be used with a conventional or jumbo loan
Combo Loan Strategies
A combo loan is when a 1st mortgage and 2nd mortgage are combined to reduce the downpayment, avoid private mortgage insurance (PMI) or, avoid the higher rates for jumbo mortgages.
To Reduce Downpayment
Let's say a particular fixed rate jumbo has a great rate but the maximum loan to value is 75% but you only have cash on hand for a 20% downpayment. By doing a 75/5 combo loan, you can get the great rate of the 75% jumbo mortgage while paying a slightly higher amount for the 5% second mortgage. If the total payment for the 75/5 combo is less than that of any other 80% LTV jumbo mortgage, you should choose the combo loan.
To Avoid PMI
Let's say the same great 75% LTV fixed rate jumbo mortgage is available but you only have 15% for the downpayment. A 75/10 combo will allow you make the 15% downpayment and avoid PMI on that portion of the loan from 80% LTV to 85% LTV.
To Avoid Jumbo Rates
For year 2008 and depending on the area, a jumbo mortgage is above the conventional conforming limit which ranges from $417,000 to $729,750. If a 20% downpayment would result in a mortgage of $750,000, rather than getting a higher rate jumbo mortgage for the full $750K, you will usually be better off combining a lower rate conventional first mortgage for $729,750 and slightly higher rate second mortgage of $20,250.
Programs
Atlantic Mortgage offers the following jumbo mortgage products:
- Fixed Rate; 15, 20 and 30 year.
- Adjustable Rate; initial fixed rate periods to 10 years with 30 year terms.
- Home Equity Lines of Credit (HELOC) are available as first and second mortgages
- Interest only options for fixed and adjustables