Description of Massachusetts Jumbo Mortgages
Jumbo mortgages are defined by their loan amount. Massachusetts home loans with a loan amount greater than the conforming loan limit (currently $417,000 for a single-family residence or condo) is known as a “jumbo mortgage”. Conforming loan limits for conventional mortgages are published annually by the Federal Housing Finance Agency. Massachusetts jumbo mortgages are considered non-conforming loans and not eligible for purchase by Fannie Mae and Freddie Mac.
Since jumbo mortgages are not guaranteed by Fannie Mae or Freddie Mac, lenders consider these loans more risky. Interest rates for Massachusetts jumbo mortgages are higher and lenders also require greater down payments than conforming loans. The minimum down payment typically is 20%, but even greater down payments are required for higher loan amounts for what are known as super jumbo mortgages. Underwriting guidelines for Massachusetts jumbo mortgages are also stricter than their conforming counterparts. Debt-to-income ratios are lower and significant reserves are required (6-12 months of PITI).
In the current lending environment, liquidity for jumbo mortgages is constrained. This type of financing is funded by the secondary market which is gun-shy about mortgage-related investments due to the industry’s problems with high delinquency rates. This in turn has greatly reduced the availability of Massachusetts jumbo mortgages in general and practically eliminated 30-year fixed rate jumbo mortgages at competitive rates. Most borrowers now choose adjustable-rate jumbo mortgages in order to get a decent mortgage rate.
Advantages of Massachusetts Jumbo Mortgages
- Allow borrowers to purchase a larger, more expensive home
Disadvantages of Massachusetts Jumbo Mortgages
- Interest rate is higher than a comparable conforming mortgage
- Require higher down payments than conforming mortgages (typically 20%+)
- Stricter underwriting requirements to qualify for financing
Borrowers Best Suited for Massachusetts Jumbo Mortgages
- High income earners that can afford a higher monthly mortgage payment
- Live in high cost areas where real estate is more expensive
Borrowers Least Suited for Massachusetts Jumbo Mortgages
- Borrowers stretching to afford a home
