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Jumbo Loans
Jumbo loans are mortgages that exceed the conforming loan limits set by the FHFA (Federal Housing Finance Agency). Limits on jumbo loans vary by location and are typically adjusted on an annual basis. These loans are typically utilized by buyers purchasing luxury properties and/or in high-cost housing markets. Jumbo loans typically have stricter qualification requirements since they aren’t eligible for purchase by Freddie Mac or Fannie Mae.
Features of Jumbo Loans:
Higher Loan Amounts: Jumbo loans allow borrowers to finance higher-priced properties that exceed the conforming loan limits.
Non-Conforming: Jumbo loans are not eligible for purchase or guarantee by Fannie Mae and Freddie Mac, making them non-conforming loans.
Varied Terms: Jumbo loans may have fixed or adjustable interest rates and various term lengths, similar to conforming loans.
Jumbo Loan Limits:
Higher Credit Score: Lenders typically require a credit score of 700 or higher for jumbo loans.
Low DTI Ratio: Borrowers should have a low debt-to-income ratio, usually below 43%.
Stable Income: Lenders prefer borrowers with stable and high-income sources to ensure repayment.
Are Jumbo Loan Rates Higher?
Jumbo loan rates may be higher for various reasons, but it doesn’t mean that’s always the case. Typically with a jumbo loan, the larger loan amount poses a bigger risk for the lender. However, lenders strive to maintain competitive rates to remain viable in the market. Since Jumbo loans are harder to qualify for, you can still get a great deal for your loan. Interest rates are influenced not only by market conditions but also by factors such as your credit score, income, down payment, and other considerations.
These minimum requirements apply to some of our loan options. There are many other alternatives and requirements available as well.
May Mortgage Rates
For all loan terms, mortgage rates moved higher this week compared to last week. According to Bankrate, on May 31st, we ended the month with an average of 7.17% for a 30-year fixed, 6.63% for a 15-year fixed rate, and 6.75% for a 5/1 adjustable mortgage rate. Despite initial concerns, comparing these figures to the previous month reveals a slight decrease in rates, as highlighted in May’s Blog Post.
This example shows the significance of regularly monitoring interest rates to track fluctuations. Despite headlines indicating rate increases, a broader perspective reveals that while rates have indeed risen, they remain marginally lower compared to the previous month.
One thing to remember is individual rates will vary. Rates also depend on your credit score, loan amount and more. Make sure to stay on top of mortgage rates so you can get the best deal for your dream home!
What Does This Mean For You?
As the past month has shown us, interest rates change daily, but as of now they will stay above the historic lows of recent years. If you can find an affordable loan, it may be smart to lock in your rate. Something to take into consideration is how long you’ll be in your home. If you’re looking for your forever home, there’s less fear if the market reverses compared to individuals planning on moving after a few years (Forbes). This is why it is crucial to find an experienced realtor and lender who can give you the best advice moving forward.
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Very useful information, interest rates are not only affected by market conditions but also by factors such as credit score, income, initial payment and other considerations. drift boss