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Why Home Buyers Use Jumbo Loans In “Non-Jumbo” Situations

By Dan Green

According to the National Association of REALTORS®, fewer homes went to contract in January than during any month since 2014, and for good reasons; Today’s mortgage rates for conforming loans, FHA, USDA, and VA loans; The very big problem with the name Jumbo Mortgage and how its harming today’s home buyers.

Buyers and Sellers Suddenly Can’t Meet On Price

Like M.C. Escher, you got to have perspective.

The National Association of REALTORS® published its most recent Pending Home Sales Index.

The report shows the number of U.S. homes under contract dropping 5 percent in January 2018 as compared to the month prior, falling to levels not seen in three-and-a-half years.

The data fell well short of expectations and caused a bit of consternation.

But, this is one of those times when you should look past the headline numbers, because when we look at January, there are a few big things that stick out.

Even still, the Pending Home Sales Index registered a 104.6.

Remember that a Pending Home Sales Index reading of 100 is equal to “how the real estate market performed” in 2001, the year the index was launched.

And 2001 was a very strong year for real estate.

We’re far above the benchmark for the index, so despite the January downturn, the real estate market remains strong and is expected to stay that way.

Click here for today’s mortgage rates.

Today’s Mortgage Rates

Good news for home buyers. Mortgage rates aren’t suffering through a case of the Mondays.

Rates for conforming loans, FHA loans, VA loans and USDA — which are often the most cheap — are trending lower.

Lower rates are helping today’s buyers who are out shopping for new homes.

So what mortgage rate can you expect from your lender today?

That’s going to depend on your your credit score, your loan size where you live, and what type of mortgage you choose to use.

Your choice in closing costs will matter, too.

Elect to pay discount points and you’ll get a lower rate. Take your lender’s zero-closing cost option and your rates will be slightly up.

Is it better to pay points to get that lower rate? That’s a choice you’ll have to make, and your lender can help you decide.

Click to get today’s mortgage rates.

“Jumbo Loans” Is About The Worst Name Ever

Did you know that you don’t have to have a jumbo loan size to use a jumbo loan.

By definition, jumbo loans are loans that are too big to be backed by Fannie Mae or Freddie Mac, that exceed your local conforming mortgage loan limits.

But, much like Kleenex, Band-Aids, and Kitty Litter, the term “jumbo” has become generic.

“Jumbo” now describes a whole group of loans that once were known as portfolio loans, as in “these are loans were not doing through the government, they’re loans we’re keeping in our own portfolio.”

It’s important to buyers that portfolio loans aren’t done through the government because lenders freedom to make their own rules.

So they do.

Regardless of size, these are each jumbo loans. It doesn’t matter if you borrow three million dollars or a hundred thousand — you can use a jumbo loan to get it done.

So, if you’ve got a large or small loan, or a slightly bizarre scenario, talk to a lender and see what you can get done.

Or, click to read up today’s most popular jumbo loans.

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Written by Dan Green

Dan Green is a mortgage lending expert and the founder of Growella. Prior to Growella, Dan was a six-time, top-producing loan officer; and, ranked repeatedly among the top 1% of loan officers nationwide. Dan's home buying expertise has been in print and on TV with The Wall Street Journal, NPR, Forbes, CNBC, and others.

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