If you live in deluxe areas like Los Angeles or New York, you may find that you can’t take out a regular mortgage on the house of your dreams. However, if you qualify, fixed jumbo mortgages can help you get that dream home with a competitive interest rate and APR. As these luxurious locations often offer a variety of high-end services and products, it might prove challenging to find suitable financing options that cater to your needs.

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In this guide, we’ll discuss everything there is to know about jumbo mortgages, from the qualification requirements and benefits to, most importantly, interest rates. We’ll provide you with insider access to current jumbo mortgage rates, along with relevant content and resources, to see if a 30-year fixed jumbo loan is a suitable loan option for you based on your location and financial situation.‍

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Understanding Jumbo Loans and Fixed-Rate Mortgages

In this section, we’ll define the two types of loans that constitute a fixed jumbo mortgage.

What Is a Jumbo Loan?

A jumbo loan is a loan that exceeds conforming loan limits, often used to finance properties in areas where high-end services and products are the norm. Jumbo loans tend to be more varied in their capacity, which the mortgage corporation determines. But aside from the more considerable amount, a jumbo loan is much like traditional mortgages that might come with credit cards or other financing options.

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These loans are available regardless of how you want to use the property – whether as a primary home or a vacation house. However, jumbo mortgage rates tend to be higher. The market is also smaller than regular mortgages because these loans aren’t as popular. You may need more research to find the jumbo loan that fits your needs.

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Most home loans in the United States are guaranteed by Fannie Mae and Freddie Mac, the two government-sponsored companies that support the housing market. These two firms follow limits set by the Federal Housing Finance Agency and can only guarantee loans under $647,200 in most areas of the country, with an increased cap of $889,200 in high-end places like New York. If the home you want to buy is priced beyond these limits, a jumbo mortgage is ideal.

What Is a Fixed-Rate Mortgage?

Fixed-rate mortgages are home loans that feature a constant interest rate. Unlike variable or adjustable-rate mortgages, the interest rate will be locked in once the loan is finalized. Because of its fixed interest rate, future market conditions will not increase or reduce your pay installments related to credit cards or other financial services.

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30-year fixed mortgages can help borrowers know how much they will pay each month. Long-term property holders prefer this. However, a 30-year fixed loan may cost more on interest rates because it will never be reduced.

Pros And Cons Of A 30-Year Fixed-Rate Jumbo Mortgage 

While 30-year fixed jumbo mortgages may help you buy the house of your dreams, they also have some drawbacks. This section will discuss the benefits and disadvantages of this type of home loan, diving into the details of bank-provided jumbo mortgages and their separate benefits and drawbacks.

Advantages of a Jumbo Mortgage

Following are several benefits to a 30-year fixed jumbo mortgage:

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• Lower Monthly Installments: One of the included benefits of a 30-year fixed-rate jumbo mortgage is lower monthly installments. By taking on this type of loan, your monthly payments will be lower than 15-year mortgages, making your payments more manageable and providing some compensation for the higher interest rates.
• More Stability: Because the mortgage rate is consistent for the entire 30-year fixed loan, you’ll pay the same amount each month until the end of your term. This provides a level of financial predictability that many borrowers find appealing.
• More significant Loan Amount: Because jumbo home loans do not conform to the standard limits, you can borrow as much as you need without using your existing cash reserves. This makes it possible to finance a more expensive property that might otherwise be out of reach.

Disadvantages of a Jumbo Mortgage

While there are certainly advantages to a 30-year fixed jumbo mortgage, there are also some disadvantages, some of which are outlined on this page.

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• Higher Monthly Payment: 30-year fixed jumbo mortgages require paying more on interest. Because this loan also features a fixed interest rate, there’s no way to reduce the rates once you have taken out the loan.
• Slower Home Equity Growth: As you make payments, your home equity builds. Home equity represents the portion of your home that you own – you can borrow against your asset or use it to fund the purchase of a new house. However, home equity builds by making payments against the loan’s principal, not the interest. Because 30-year fixed mortgages require you to pay more interest despite similar rates, paying off the principal loan will take longer. This means your home equity will build slower.
• Strict Qualification Requirements: Lenders take on more risk with jumbo loans. Due to this, your mortgage application will be examined with more scrutiny – any sign of financial misstep or poor money management will hurt your chances of qualifying. Due to the coronavirus pandemic and the subsequent drop in mortgage rates, lenders may impose even stricter qualification requirements. Depending on the lender, you may need to provide more proof of your financial stability and show a credit score of more than 700.

Insider Access To Jumbo Mortgage Rates 

Whether buying or refinancing a jumbo loan, comparing interest rates is essential. Make sure to weigh your loan options using current mortgage rates and APR. As of April 2023, the national average 30-year fixed jumbo mortgage interest rate is 6.88 percent, and the national average 30-year fixed jumbo refinance interest rate is 6.99 percent.

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We've collated the information in the table below to help you visualize up-to-date jumbo mortgage rates available on the market. These national averages for mortgage and refinance interest rates are taken from a comprehensive survey of lenders nationwide and updated on bankrate.com.

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Still weighing your options? Use our mortgage calculator to estimate your monthly mortgage installment and determine how much you will pay for the house you are about to purchase at the different interest rates and term loan options. With just your financial information and zip code, we’ll calculate personalized estimates to help you get started.

Jumbo loan rates can make a significant difference in your mortgage product options. By following certain guidelines and utilizing the proper tools, you can ensure that you select the best rate for your needs.

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Factors that Affect Jumbo Mortgage Rates

With jumbo mortgage loans, creditors may impose stricter requirements because they take more risk. That is exacerbated by the fact that a jumbo mortgage cannot be resold to Fannie Mae and Freddie Mac, which means that the particular lender takes on all the risk.

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Because of the additional risk, borrowers need a good credit score, a hefty salary, and an adequate amount of money for the down payment. Below, each of these qualification requirements is broken down:

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Credit Score

A borrower's credit score is one of the most critical requirements in qualifying for a loan. In a conforming loan, you’ll need a credit score of 500 or higher. However, because jumbo home loans are riskier, you’ll need a score of at least 700, which will also positively impact your eligibility for credit cards and other financial services.

Down Payment

Another factor determining your eligibility is how much down payment you can provide. Lenders require 20% in advance to qualify for a jumbo loan. Some lenders will allow you to pay less but also request private mortgage insurance to mitigate the risk.

Proof of Income And Cash Reserves

Lenders may ask for proof of consistent earnings to ensure you can repay your loan. They also require you to have cash reserves before approving your application – most lenders want to see up to two years’ worth of documentation.

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Tips for Getting the Best Jumbo Loan Rates

Getting the most affordable rates on your home loan is essential. This section will share tips to help you get a better interest rate.

Review Your Credit Report

Before applying as a borrower, ensure that your credit report is adequate. Thoroughly review your credit report and mark all inaccuracies or discrepancies. If something is dragging your FICO score down, try to open a dispute with the credit provider.

Shop Around For Loan Offers

Mortgage lenders are required to give you standardized loan estimates containing details such as interest rates, the annual percentage rate, closing costs, and other information. By comparing these estimates, you can choose the lender providing the loan that benefits your financial plans. Mortgage lenders always compete for a borrower’s business, so homebuyers should use that to their advantage.

Work With A Specialized Mortgage Broker

Shopping for loans is tiring work. To expedite the process, you can enlist the help of a mortgage broker. Because of their experience and connections to various lenders, they can find the loan offer that fits your requirements. Working with a broker may also receive better rates on lender fees.

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Questions to Ask When Comparing Jumbo Mortgage Rates

Below are a few frequently asked questions when it comes to comparing the mortgage rates on a 30-year fixed jumbo loan.

Can I Refinance a Jumbo Mortgage?

Finding the best mortgage rates doesn’t just end when you receive the money. Once you’ve had your home for several years and built equity in it, you can consider refinancing. Refinancing means that you’re replacing your current mortgage with a new one.

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People refinance mortgages for various reasons. A common reason is to reduce the monthly payment by refinancing into a loan with lower interest rates. You can also pay off your loan faster by refinancing into a shorter-term loan – from a 30-year fixed-rate mortgage to a 15-year mortgage, for instance – trading the higher interest off for higher installments.

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While refinancing a jumbo mortgage may be more challenging due to the stricter qualification requirements, it can still be a viable option. Be sure to meet your lender’s credit and debt standards before you apply. If you can’t get a refinance through your current lender, search for another that has more relaxed acceptance standards.

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What Are Common Mistakes to Avoid When Comparing Jumbo Mortgage Rates?

Regardless of the amount of your home-buying experience, errors related to mortgages can take place while purchasing a house—even with vigilant precautions. Having knowledge of some of the commonplace issues can help you build a plan around them or find a means of staying away from them.

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Examine these five common mistakes when comparing mortgage rates to make sure nothing prevents you from purchasing the home of your dreams.

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• Not checking your credit first
• Not getting pre-approved
• Not considering your loan-to-value (LTV) ratio
• Not considering closing costs and other fees
• Not comparing the rates to other loan options
  

What Are the Alternative Home Loan Options for Jumbo Mortgages?

30-year fixed-rate jumbo home loans may not be for everyone. In this section, we’ll cover other options for your home purchase.

Adjustable-Rate Mortgages

Sometimes called a variable-rate mortgage, this loan features a moving interest rate. An adjustable-rate mortgage (ARM) has fixed interest rates at the beginning of the loan and will adjust periodically afterward. These periods are expressed in the mortgage title, like a 7/1 ARM or a 5/1 ARM.

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If you take out a 5/1 ARM, you will have a fixed mortgage rate for the initial 5-year period, and then the interest will adjust every following year. Lenders set caps on the yearly interest increase to prevent the rates from skyrocketing.

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If you plan to pay off the entire amount in a specific time frame and can handle the rate adjustments, a 5-year ARM may be ideal.

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FHA Loans

FHA loans, provided by the Federal Housing Administration, are geared toward low-to-moderate-income homebuyers. These loans feature a lower down payment and competitive interest rates. Lenders are also more lenient with FICO score requirements – you need a FICO score of at least 620 and a 3.5% down payment to qualify.

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However, because you’ll pay for mortgage insurance, you may pay more with an FHA loan. Also, if you’re looking to buy a more expensive home, FHA loans may be unsuitable because of their lower limits than other mortgage types.

Closing Thoughts 

Sometimes your dream home may be priced beyond what ordinary loans can offer. Taking out a thirty-year fixed jumbo mortgage can help pay for the house. Its fixed rates will also help you plan your expenses, preventing unnecessary surprises on your mortgage.

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If you’re considering a fixed-rate jumbo mortgage for your new house, Wesley Mortgage is here to help! Our team of financial professionals will leverage their experience to assist you in finding a loan with affordable rates that best suit your budget. Contact us today for more information!

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