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Jumbo Mortgages

There is a term in the world of mortgages that more and more people are becoming familiar with. That term is “Jumbo Mortgages,” and is exactly as the name implies. These are mortgages that were originally intended for luxury homes and estates much like the typical family couldn’t afford, however with the boom of the real estate industry in the mid 2000’s giving way to higher prices for homes, more and more people needed to start using these types of mortgages to be able to buy homes.

Jumbo mortgages were considered to be a loan that was in excess of $465,000. They are different in many different ways from conventional mortgages and are created with much more stringent qualifications, higher down payment amounts and higher interest rates than that of a conventional mortgage. This didn’t stop people from going and getting these loans however and now, there are a great many people out there who wish they hadn’t gotten such loans.

For example now that things have fallen apart somewhat economically, jumbo mortgages are harder to get financed. The reason that they’re so much harder is that property values have dropped so much. One of the reasons that this has happened is that during the real estate boom of the late 1990’s and early 2000’s real estate prices went up very dramatically. Those who had already purchased houses loved it because now their houses were worth much more than what they bought them for.

However on the down side of that was the fact that many dealers and appraisers got a little over-zealous in their desire to see real estate prices continue to rise. The bubble got bigger and bigger and home values kept going up and up and up, but like everything else that goes up, they came down eventually. Many of the homes that fit into the scale of what fit a jumbo mortgage just barely crossed the price threshold for these types of loans while real estate values were at their peak.

Now that property values have gone through a correction and dropped considerably, those homes simply aren’t worth what they once were and many of them got leveraged as much as they could possibly be leveraged. So with no real equity left in their homes and the difficulties that are involved with refinancing a jumbo loan, many are finding themselves stuck.

One of the reasons that these are harder to get as well is that the major buyer of mortgages in the US is Freddie Mac and Fannie Mae and they simply don’t purchase jumbo loans. Mortgages are no longer held by the local bank that originally made the loan, but instead are traded on the secondary mortgage market. If you’ve been a homeowner and have gotten many different letters from your mortgage company saying that they’ve sold your mortgage to XYZ corporation, you’ll know exactly what this means. Take this knowledge with you when you pursue either buying a new home or refinancing your home and you’ll be better off for it