Austin Jumbo Loan FAQ


Jumbo Loan AustinWhat is an Austin jumbo loan?


Austin jumbo loans are mortgages that contain loan amounts that exceed the conventional loan limits set by the Federal National Mortgage Association (FNMA). Therefore, jumbo loans are often securitized by institutions other than Fannie Mae and Freddie Mac.


Are Austin jumbo loans only applicable for 2nd homes or vacation homes?


No, jumbo loans can be used on primary residences as well. Homes in popular cities and their high-demand suburbs often require jumbo loans because of the steep rise in housing prices. In order to assist borrowers and make these loans more affordable, lenders sometimes offer a 40 or 50 year repayment option. Also, some lenders may provide borrowers the option of making interest-only payments. This lets borrowers purchase homes that would have been otherwise impossible to afford.


Do Austin jumbo loans require a down payment?


Austin jumbo loans do require a down payment. In attempt to lighten the high risk they assume by carrying the jumbo loan, lenders often ask for a higher than usual down-payment on a jumbo loan, usually an additional 5%.


How do interest rates for Austin jumbo loans compare to that of Austin conventional loans?


Because the securities on an Austin jumbo loan often carry more credit risk than a conforming loan, they often trade at a yield premium resulting in a slightly higher interest rate. Take for example, a luxury home. If the buyer defaults on their loan, the home is going to be extremely difficult to sell promptly and at its full value. Since Austin luxury homes are more vulnerable to market highs and lows, jumbo loan interest rates are roughly set .25-.5 % higher than conventional loan interest rates. Housing turmoil and high investor anxiety have caused Austin jumbo loan interest rates to rise as high as 1% higher than the conventional rates. Other factors that can influence interest rates include loan amounts and property types.


Do I have to maintain Private Mortgage Insurance (PMI) on an Austin jumbo loan?


Not necessarily. Private Mortgage Insurance, or PMI, is only required for those who borrow more than 80% of the value of their home. If your Loan to Value, or LTV, ratio is under 80%, then PMI is optional. Many choose to split their Austin mortgage into two separate parts. They usually borrow 80% with an Austin jumbo loan and the remainder with a higher interest 2nd mortgage. By doing this, the borrower ultimately alleviates the need for PMI on the primary/jumbo loan.


Can you refinance an Austin jumbo loan?

Yes, you can refinance your Austin jumbo loan with Austin mortgage!