30-Year Fixed Jumbo Mortgage Rates: Insider Access To The Most Current Rates
If you live in high-cost areas like Los Angeles or New York, the perfect home may not come cheap. You may find that you can’t take out a regular mortgage on the house of your dreams because the price is too high. However, if you can qualify for it, fixed jumbo mortgages can help you get that expensive house with a competitive interest rate and APR.
In this guide, we’ll discuss everything about jumbo mortgages. We’ll explain its qualification requirements and its advantages. We’ll also provide you with personalized jumbo mortgage rates to see if a 30-year fixed jumbo loan is right for you.
Understanding Fixed Jumbo Mortgages
In this section, we’ll define the two main types of loans that constitute a fixed jumbo mortgage.
Most home loans in the United States are guaranteed by Fannie Mae and Freddie Mac, two government-sponsored companies that support the housing market. These two companies follow limits set by the Federal Housing Finance Agency and can only guarantee loans under $548,250 in most areas of the country, with an increased cap of $822,375 in high-cost areas like New York. This poses a problem if the home you’re looking to buy is priced beyond these conforming loan limits.
A jumbo loan is a large loan that exceeds conforming loan limits. Jumbo loans tend to be more varied in their maximum size, which is usually determined by the mortgage corporation. But aside from the larger loan amount, a jumbo loan acts much like traditional mortgages. These loans are available regardless of how you want to use the property – whether as a primary home or a vacation house.
However, jumbo mortgage rates tend to be slightly higher compared to the rates you’ll find on conforming loans. The market is also smaller compared to regular mortgages because these loans aren’t as popular. This means that you may need to do more research to find the jumbo loan that fits your needs.
These loans feature a fixed interest rate. Different from variable or adjustable-rate mortgages, the interest rate will be locked in once the loan has been finalized. Because of its fixed interest rate, market conditions won’t increase or reduce the installments that you have to pay.
30-year fixed mortgages can help a borrower know how much they’ll be paying each month. Long-term property holders prefer this because they can predict how much they’ll need to pay until the end of their loan term. However, a 30-year fixed loan may end up costing you more on interest rates because there is no chance for it to be reduced.
What Do I Need To Qualify For A Fixed Jumbo Mortgage?
With jumbo mortgage loans, creditors may impose stricter requirements on you because they take more risk on these loans. This is exacerbated by the fact that a jumbo mortgage cannot be resold to Fannie Mae and Freddie Mac, which means that lenders take on all the risk themselves.
By lending money to you, creditors take a risk – after all, there may be a chance that you won’t be able to keep up on your loan payments. Due to this, you may need to show solid proof that you can pay each monthly payment on time.
You’ll need to have a good credit score, a large salary, and the money for the larger down payment compared to a conforming loan. Let’s break each of these qualifications down:
Good Credit Score
One of the most important requirements in qualifying for a loan is your credit score. In a conforming loan, you’ll only need a credit score of 500 or higher to qualify. However, because jumbo home loans are larger and riskier for the lender, you’ll need a score of at least 700.
Another factor that determines your eligibility is how much down payment you can provide. Generally, lenders will require you to pay 20% in advance to qualify for a jumbo loan. Some lenders will allow you to pay less than 20% down but require you to take private mortgage insurance to mitigate the risk.
Consistent Income And Cash Reserves
To ensure that you can pay for your loan, lenders may also ask for proof of a consistent income. Usually, you’ll need to provide two years’ worth of income documentation. They’ll also require you to have cash reserves on hand before approving your application – most lenders want to see up to two years’ worth of expenses in your bank account.
Advantages And Disadvantages Of A 30-Year Fixed-Rate Jumbo Mortgage
While 30-year fixed jumbo mortgages may help you buy the house of your dreams, they also have some drawbacks. In this section, we’ll discuss the benefits and disadvantages of this type of home loan.
Lower Monthly Installments
By taking on a 30-year fixed-rate loan, your monthly payments will be lower compared to 15-year mortgages. In addition to making your payments more manageable, this allows you to save more money to pay for other things such as your retirement fund and home maintenance.
Because the mortgage rate is consistent for the entire 30-year fixed loan, you’ll pay the same amount each month until the end of your term. The predictable rates will help you budget future expenses better, reducing the likelihood of a surprise expense putting a large dent in your finances.
Larger Loan Amount
Because jumbo home loans do not conform to the regular limits, you can borrow as much as you need. Being able to take out a large loan amount allows you to buy properties with a high purchase price without having to use your existing cash reserves.
Competitive Annual Percentage Rate And Interest Rate
Despite the large amount, a thirty-year jumbo mortgage’s rate is comparable to those of their traditional counterparts. As of January 2021, a 30-year fixed-rate jumbo loan comes with a 2.91% interest rate – a small increase compared to the 2.88% interest rate of a 30-year conforming loan. They also feature a similar annual percentage rate, with an APR of 3.190% for 30-year fixed conforming loans and a 3.020% APR for a 30-year jumbo loan.
Higher Monthly Payment
Despite the similar mortgage rates compared to conforming loans, thirty-year fixed jumbo mortgages will require you to pay more on interest due to the larger amount. Because this loan also features a fixed interest rate, there’s also no way to reduce the rates once you’ve taken out the loan.
Slower Home Equity Growth
As you continue to make payments, your home equity builds. Home equity represents the portion of your home that you truly own – later in life, you can borrow against your asset or use it to fund the purchase of a new house.
However, home equity only builds by making payments against the loan’s principal and not the interest. Because 30-year fixed mortgages require you to pay more interest despite their similar rates, it’ll take more time for you to pay off the principal loan. This means that your home equity will build slower.
Strict Qualification Requirements
Lenders take on more risk with jumbo loans. Because of this higher risk, they’ll need more proof that you’re able to make each monthly payment on time. Due to this, your mortgage application will be examined with more scrutiny – any sign of financial misstep or bad money management will hurt your chances of qualifying.
Due to the coronavirus pandemic and the subsequent drop in mortgage rates, lenders may impose even stricter qualification requirements. Depending on the lender, you may need to provide more proof of your financial stability and show a credit score of more than 700.
Refinancing Your Mortgage
Finding the best mortgage rates doesn’t just end when you receive the money. Once you’ve had your home for several years and built equity in it, you can consider refinancing. Refinancing means that you’re taking out a new loan to pay off your original home loan, effectively replacing your current mortgage with a new one.
People refinance mortgages for various reasons. One of the most common reasons is to reduce your monthly payment amount by refinancing into a loan with lower interest rates. You can also opt to pay off your loan faster by refinancing into a shorter-term loan – from a 30-year fixed-rate mortgage to a 15-year mortgage, for instance – trading the higher interest off for higher monthly installments.
While refinancing a jumbo mortgage may not be as easy as refinancing a conforming one due to the stricter qualification requirements, it can still be a viable option. Be sure to meet your lender’s credit and debt standards before you apply for a refinance. If you can’t get a refinance through your current lender, you can try searching for another one that has more relaxed acceptance standards.
Alternative Home Loan Options
30-year fixed-rate jumbo home loans may not be affordable for everyone. In this section, we’ll cover other options you can consider for your home purchase.
Sometimes called a variable-rate mortgage, this loan type features a moving interest rate. An adjustable-rate mortgage (ARM) usually has fixed interest rates at the beginning of the loan and will adjust periodically afterward. These periods are usually expressed in the title of the mortgage, like a 7/1 ARM or a 5/1 ARM.
If you take out a 5/1 ARM, it means that you’ll have a fixed mortgage rate for the initial 5-year period, and then the interest will adjust every following year. To prevent the rates from rising uncontrollably, lenders typically set caps on the yearly interest increase.
If you’re planning to pay off the entire amount in a specific time frame and you’re financially stable enough to handle the rate adjustments, a 5-year ARM may be right for you.
FHA loans, provided by the Federal Housing Administration, are geared towards low-to-moderate income homebuyers. To help them buy homes, these loans feature a lower down payment and competitive interest rates. Lenders are also more lenient with FICO score requirements – generally, you only need a FICO score of at least 580 and a 3.5% down payment to qualify for an FHA loan.
However, because you’ll be required to pay for mortgage insurance, you may end up paying more money with an FHA loan. Also, if you’re looking to buy a more expensive home, FHA loans may not be right for you because of their lower limits compared to other mortgage types.
Tips To Get The Best Home Loan Rates
Getting the most affordable rates on your home loan is important because you’ll be paying much less over the course of your loan. In this section, we’ll share some tips that can help you get a better interest rate.
Review Your Credit Report
Before applying as a borrower, you should ensure that your credit report is as good as it could be. You should thoroughly review your credit report and mark any inaccuracies or discrepancies on anything that may lower your score. If you find something dragging your FICO score down, you can try to open a dispute with the credit provider.
Shop Around For Loan Offers
Mortgage lenders are always competing for a borrower’s business. This means that they’re likely to give out lower rates to attract a borrower – you can take advantage of that by shopping around for loans.
Mortgage lenders are required to give you standardized loan estimates, containing details such as mortgage interest rates, the annual percentage rate, closing costs, as well as other important details. By comparing these estimates, you can weigh your options and choose the lender that provides the loan that fits your financial plans.
Work With A Specialized Mortgage Broker
Shopping for loans by yourself is tiring work. To expedite the process, you can enlist the help of a mortgage broker. Because of their experience and connections to various lenders, they can do the legwork and find the loan offer that fits your requirements. You may also receive better rates and save on lender fees by working with a broker.
Sometimes, your dream home may be priced beyond what normal loans can offer. To help you pay for the house, you can take out a thirty-year fixed jumbo mortgage that allows you to borrow money beyond conforming to loan limits. Its fixed rates will also help you plan your expenses for the future, preventing any unnecessary surprises on your mortgage.
If you’re considering a fixed-rate jumbo mortgage for your new house, Wesley Mortgage, LLC is here to help! Our team of financial professionals will leverage their experience to assist you in finding the loan with affordable rates that best fit your budget. Contact us today for more information!