The Facts On Jumbo Mortgage Loans
If you dream about the day when you will be able to purchase a big, beautiful, luxurious home, you might want to know that unless you have the cash to buy the home outright, the mortgage required to buy the home is a little different than your typical mortgage. Jumbo mortgage loan is the term that's been given to the type of mortgage loan needed to buy an expensive home. These types of mortgages have a few different rules and guidelines within their terms.
There is a great deal more risk for the lender when they issue this type of loan. Most of the homes that fall into this high priced category are considered high-end luxury homes. Obviously, these types of homes are large, beautiful, and sometimes extravagant. Because of this, they are often harder to resell. Many people looking to spend that kind of money on a home are looking to customize their own home, and not necessarily buy one that was already designed and built.
The more extravagant homes don't always appeal to a mass amount of people. For this reason, it takes more time to sell the homes. If during the time it takes to sell, the borrower defaults on the loan, than the bank has now assumed the responsibility for the house. Banks don't like to have foreclosed homes on their hands.
The first thing that is required of the borrower is to put down a large down payment. The typical ten to twenty percent down usually isn't enough to qualify.
The second way banks absorb some of the risk is by attaching high interest rates to the mortgage. This allows the bank to make more money in the short and long run of the loan. This also makes the monthly mortgage payment a lot higher as well so the homes are quite costly to the borrower.
Lenders also have the potential of making a lot of money of these types of mortgages. This is another reason they are sometimes willing to take the risk in issuing them. Banks issue the loans with high interest rates which allows them to make big money on the loan.
The amount of the loan is high which means they are already making money, but with a higher interest rate, they make even more money. The closing costs are also elevated. This all translates to more money for the lender.
For those of you who have expensive taste and want to own an expensive home, realize that you will have to take on a jumbo mortgage in order to purchase the home.
There is a great deal more risk for the lender when they issue this type of loan. Most of the homes that fall into this high priced category are considered high-end luxury homes. Obviously, these types of homes are large, beautiful, and sometimes extravagant. Because of this, they are often harder to resell. Many people looking to spend that kind of money on a home are looking to customize their own home, and not necessarily buy one that was already designed and built.
The more extravagant homes don't always appeal to a mass amount of people. For this reason, it takes more time to sell the homes. If during the time it takes to sell, the borrower defaults on the loan, than the bank has now assumed the responsibility for the house. Banks don't like to have foreclosed homes on their hands.
The first thing that is required of the borrower is to put down a large down payment. The typical ten to twenty percent down usually isn't enough to qualify.
The second way banks absorb some of the risk is by attaching high interest rates to the mortgage. This allows the bank to make more money in the short and long run of the loan. This also makes the monthly mortgage payment a lot higher as well so the homes are quite costly to the borrower.
Lenders also have the potential of making a lot of money of these types of mortgages. This is another reason they are sometimes willing to take the risk in issuing them. Banks issue the loans with high interest rates which allows them to make big money on the loan.
The amount of the loan is high which means they are already making money, but with a higher interest rate, they make even more money. The closing costs are also elevated. This all translates to more money for the lender.
For those of you who have expensive taste and want to own an expensive home, realize that you will have to take on a jumbo mortgage in order to purchase the home.
About the Author:
Sarah's worked has helped hundreds of people to learn about mortgages for people with bad credit and about other types of interesting and creative home loans with bad credit.
posted by Debt Consolidation Loan at
3:54 PM
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