Good News About Jumbo Loans

For up-to-date information regarding the mortgage and financial industries,
please visit Ken Jacobson's website,
www.kenjacobson.com

Several months of positive housing data indicates that the real estate market is stabilizing.  Couple this with the new availability of jumbo loans and this brings much needed relief to the upper-end market.  Many lenders, not fully understanding how the jumbo market fit into the overall tightening of credit, ceased offering larger mortgages.  This left high-end homeowners in a tough spot with few financing options available for them to refinance and if they were attempting to sell their home, it further restricted an already small pool of prospective buyers.  “The jumbo market is opening up, the funds are plentiful and rates are low,” says Ken Jacobson, CMPS, a mortgage expert at Hometrust Mortgage in Houston, Texas.  “Just in the last month competition in the jumbo market has caused rates to fall over two-percent, putting a 30 year fixed loan in the mid-to-high five-percent range and a 15 year fixed loan in the high four-percent range.” 

However, the key to getting a great mortgage is to look beyond the numbers.  In the wake of some of the largest financial institutions failing and home buyers attempting to navigate the new rules of mortgage financing, what are consumers to do and how do they know they are getting a fair deal?

1.  Get referrals.  Who you work with is a critical element in the mortgage process.  It is important that your mortgage planner is ethical, experienced and knowledgeable about current mortgage products and the constantly changing rules associated with them.  Be honest and upfront with your mortgage planner.  Hiding information will only hinder your loan process.  There is no such thing as a perfect borrower and a good mortgage planner will guide you through the process.  If you are unsure where to start, look for a Certified Mortgage Planning Specialist.  CMPS professionals are educated in mortgage, cash flow and real estate equity management strategies that help you build and conserve wealth, become debt free and achieve financial freedom.  It is one of the few designations that require ongoing training and testing as well as adherence to a strict code of ethics.

2.  Know where you stand.  “Right now, credit is more important than ever,” says Ken Jacobson.  “We encourage people to talk to us when they are first thinking about a refinance or purchasing a home.  We go through their credit with them make to sure there aren’t any surprises.  If there is something that would prevent them from getting financing now, we give them an action plan and ideas of what to do to get their credit in shape.  Now that sub-prime and alternative lending is a thing of the past, doing this early in the process puts most borrowers at ease and prevents disappointment later.” 

3.  Consider the future.  There are a lot of great mortgage programs available, but they aren’t great for everybody.  When discussing options with your mortgage planner think about how long you plan to live in the house, whether you will sell the house when you move or keep it as a rental.  If discussing adjustable rate programs, calculate the payment at higher rates and see if it is still manageable.  “I encourage all of my clients to do a budget when getting a mortgage.  It is important for them to understand their cash flow with all their current and future expenses.  Little things are sometimes missed that may have a big impact later, for example, a larger house generally has larger utility bills.  And, this is also a good opportunity for couples to make sure they are on the same page as far as their spending.  I have line items in my budget for furnishings, window coverings, appliances and yard equipment.  Adjusting the amount of the down payment may be an option when discussing any initial big ticket items,” says Jacobson.  “Getting a mortgage is not a ‘no brainer’ as some companies claim.  It is a significant financial instrument, a sizable debt and requires careful consideration.  The most important factor in getting a mortgage is how well you sleep at night.  If someone tells you that an interest-only mortgage is perfect for you, but you are uncomfortable with it – don’t do it.”

4.  If it sounds too good to be true, it probably is.  Obtaining mortgage financing is relatively straightforward these days, however, be wary of anything that sounds too easy.  Underwriters are making sure that borrowers have employment history, income and assets.  Borrowers almost always have to have a down payment and they must be able to afford the monthly payment.The startling realization that many homeowners are coming to is that they don’t qualify today for the home they already own.  Many homeowners originally purchased their home with a stated-income or no-income loan, which are not available now.    

5.  Read the fine print.  If you are talking to more than one lender, comparing the APR on the Truth in Lending forms and analyzing the differences in the Good Faith Estimates is helpful, but don’t stop there.  There is also the loan program to consider and whether there is a pre-payment penalty.  Take the time to read through the specific lender disclosures, as well as their privacy policy; it is important you know and understand what you are signing.

For up-to-date information regarding the mortgage and financial industries, please visit Ken Jacobson’s website, www.kenjacobson.com.