If your dream home needs financing over the Fannie Mae or Freddie Mac $322,700 loan max, you’ll have to go with a mortgage lender who does nonconforming (outside Fannie Mae guidelines) jumbo loans. These loans cost about .5 percent more than conforming programs. Secondary market. These players in the mortgage secondary market are typically insurance companies, banks, savings and loans, credit unions, pension funds, etc. Many of these niche lenders make direct loans for their own portfolio and have their own underwriting standards and loan limits.
You can also finance a jumbo mortgage without paying a higher rate by taking out a first mortgage at the Fannie Mae loan limit and then getting a second mortgage to cover the rest of the purchase price. Even though second mortgages typically carry a higher interest rate than a first mortgage, they’re generally for a shorter period of time— say, 10 years. When you average the two rates, it’s usually cheaper to get a conventional first mortgage and a more expensive second mortgage than it would be to get a long-term jumbo loan.
You can also finance a jumbo mortgage without paying a higher rate by taking out a first mortgage at the Fannie Mae loan limit and then getting a second mortgage to cover the rest of the purchase price. Even though second mortgages typically carry a higher interest rate than a first mortgage, they’re generally for a shorter period of time— say, 10 years. When you average the two rates, it’s usually cheaper to get a conventional first mortgage and a more expensive second mortgage than it would be to get a long-term jumbo loan.
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