Jumbo loan interest rates and fees are determined very much the same way as conventional or FHA mortgages. First, mortgage interest rates are greatly influenced by risk. It’s really simple, the less risk to the lender or bank, the lower the interest rate you the borrower will receive. Below we will details some factors that determine Jumbo loan interest rates.
Five primary factors when determining mortgage rates & risk:
- Your Credit Score: Generally buyers with credit scores over 740 receive the lowest interest rates. These borrowers have demonstrated a solid credit and timely payment history. Credit scores can influence interest rates in a big way. One buyer that has an 800 credit score may receive over ½% in interest rate saving versus the buyer that has a 650 score.
- Your Down Payment: Again, it’s all about the risk to the lender, so buyers that put down larger down payments (20%+) will receive the best terms. The difference could be over ¾ percent when comparing 20% down versus 5% down payment.
- Your Loan Amount: How much are you borrowing? $500,000 or $2,000,000? The greater the loan amount, the more risk to the lender, thus the higher interest rates.
- Your Property & Purchase Type: Are you purchasing a primary home, second home, investment purchase? What about the property type – single-family, multi-family, condo? Interest rates will likely always be higher on any investment home purchases. Some lenders will also look at certain condos different than a regular single-family home and adjust rates accordingly.
- Your Loan Term: Are you choosing a long term 30-year fix rate, or short term 15 year? Longer-term loans will always have slightly higher rates. Adjustable rate mortgages (3,5,7,10 year) often times have even lower rates but without the long term security of a fixed rate.
Fees and closing costs on Jumbo loans:
Fees and closing costs are similar to other loan programs. There are no extra fees for doing a Jumbo loan. Like all mortgages, the fees will be established based on the loan amount, property state, and a verity of third parties involved.
Additionally, the transaction type (purchase or refinance) will influence the overall costs. Example: for a purchase loan you would likely obtain a home inspection at a cost of $500-$1,500. For a refinance, this cost would not be needed.
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