If you are looking at securing a jumbo loan then you may want to consider a few strategies that could make your jumbo home loan turn into a more traditional home loan.
The reason for this is quite simple – the costs for regular mortgage loans is less than for jumbo mortgage loans (for two main reasons). First, the government does not back jumbo loans like they do traditional ones. By not backing them via the mortgage agencies of Freddie Mac and Fannie Mae, the banks end up taking on more risk than they otherwise would. In addition, if people who own homes that fall into the jumbo category default it is harder for the foreclosing bank to sell off the property and recoup their costs, again adding more risk to the banks mortgage portfolio. And, as always, more risk will (and should) equal higher required return on capital, which ultimately means higher costs for a jumbo loan borrower.
However, one trick that you might be able to look into is if your loan amount is bordering on the current loan limits, then you can possibly pay a little more down on the loan upfront. This can possibly transform the loan from a jumbo to a traditional, saving you around 50 basis points (or 1/2 of one percent) on the loan’s interest rate – which can add up to thousands of dollars easily over the life of the loan. A second strategy would be to see if you can find someone who will be willing to lend you money to make such a payment (if you don’t have the cash but would like to lower your monthly payments). While you will pay a higher interest rate on the second loan the savings on the first, and bigger, loan may add up and make this a viable and financially sound option.
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