A Super Jumbo Loan comprises a loan amount greater than
$650,000 and quite commonly goes up to $10 million. Both jumbo and super jumbo
loans contain the purchase and refinance of expensive luxury homes, vacation properties,
and high-end SFR (single family residence) investment properties.
In fact, this is the defining characteristic of the super
jumbo loan. The other "baggage", if you will, that often go on with these
loans, is the large amount of paper work, higher private mortgage insurance,
and the higher interest rate.
There have been increases in the super jumbo loan limits in
some areas of the country, simply due to the increase in housing market and
home prices, every home purchased would be a jumbo or super jumbo loan, if the
limits weren't extended. Most of these areas are resort homes, vacation homes,
and property is scarce.
What is happening today, however, is the growing segment of
the population that really needs the super jumbo loan financing in order to buy
their home; not make a business investment. What does this say about our real
estate market, and the value of the property?
Super Jumbo loans are an investment tool they're not for the
average borrower. Or so we thought. Today, however, owing to the growth in real
estate prices, and the ever waning value of the dollar, average consumers are
applying for these jumbo loans increasingly, and using them to finance a home
purchase.
The need of a super jumbo loan arises in your resort area
housing when you see the home prices rising to a level. Over the last couple of
years, many of these homes have risen tremendously and the loan needs have
risen to all time highs. The super jumbo loan has now become a real mortgage
product, not just an investing tool.
Prior to getting too deep into the real estate market, and
the use of the super jumbo loan, perhaps we'd better define this type of loan
and the repercussions of financing your mortgage in this manner.
Now, it deserves to be said that there are alternatives to
avoid this type of loan having explained the definition of the super jumbo loan,
and still secure the funding you need to purchase a home, devoid of using all
your life's savings to do so.
It might also be interesting to know, that Freddie Mac and
Fannie Mae, the two largest mortgage buyers present today, usually establish
these limits, and say loud to many lending companies exactly what they will
buy, and how.
It should not need to be mentioned that these loans present
a bigger risk than the other, traditional loan requirements, and therefore must
meet some thorough requirements.
You need to understand how the mortgage market actually works
and the role these two companies play in that process to further explain the
role Freddie Mac and Fannie Mae play in the determination of the super jumbo
loan limits and expense.
Today, you sign a waiver that states that you understand
that your loan may be sold to another servicer if a mortgage company loans you
money to purchase a home. They should simply have you sign a form that says you
know your loan is going to be sold; who is it? Freddie Mac and Fannie Mae.
In order to make another mortgage loan possible, the
mortgage companies find it necessary to resell your mortgage. So, they must
abide by the rules established by the mortgage purchasing companies quite
naturally.
Super jumbo loans can prove quite risky, so Freddie Mac and
Fannie Mae don't even purchase these types of mortgages. For the mortgage
companies that do, there are set limits, and they require more information,
larger proven income levels, and adequate private mortgage insurance to assure
that the home won't go into foreclosure and auction.
The current estimate for the jumbo and super jumbo loan
market is generally around 15%; that is still a pretty large hunk of the
mortgage market.
Our real estate prices are increasing at an astonishing rate,
and right along with that, is the increase in products being offered by the
mortgage lenders, therefore, it only stands to reason that we would see an
increase in the jumbo and super jumbo loan market.
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