Little Rock homebuyers in seeking Jumbo mortgage amounts can read about the new reduced down payment programs available today. First, it’s important to identify the meaning of a Jumbo loan. In Pulaski County and all of Arkansas, any loan amount up to $510,400 would be classified as a typical Fannie Mae conforming loan. If the loan amount exceeds this amount, it would be considered “jumbo”
Low down payment options for jumbo loans have typically been limited by most banks and lenders. Most programs in the past required 20% (or more) down payment depending on the loan amount and credit profile of the buyer. Since real estate isn’t the most “liquid” assets, borrowers often search for reduced down payment options that will preserve their liquid assets instead of depleting them.
For Little Rock buyers, there are competitive loan programs today that require only 10 percent or even 5 percent down, preserving liquid assets and leveraging the low rates we’re enjoying today. Regardless of where in AR, there are competitive jumbo loan programs that don’t require a sizable down payment.
For example, there is an 80-10-10 combo loan that only asks for a 10 percent down payment. The program is structured with two loans, a first lien mortgage at 80 percent of the sales price of the home and a second, subordinate lien also at 10 percent of the sales price. For example, take a luxury home listed at $1,000,000. With the 80-10-10 option, the buyers make a down payment of $100,000. The first mortgage at 80 percent of $800,000 would then followed by a second lien at $100,000.
Another option is to make a down payment of 5 percent and financing the balance. Again, using a combo loan structure, the down payment would then be only 5% or $50,000. With this structure, the borrowers are only required to make a 5 percent down payment plus required closing costs, thus retaining more liquid savings.
NOTE: The most important reason for a combo loan structure is to avoid monthly mortgage insurance or more commonly known as “PMI”
Finally, there are single loan programs that ask for either a 5 percent down payment or 10 percent. The general rule of thumb when comparing these various options means a down payment of 10 percent will result in a slightly lower interest rate compared to a jumbo loan with 5 percent, in a similar manner that conventional, conforming loan programs are priced. Interest rates are determined by risk, and greater down payments always lower the overall risk to mortgage companies.
Keep in mind these programs aren’t restricted to Arkansas and can also be used to finance any eligible primary owner-occupied home nationwide. The loan structure, down payment and mortgage limit, will depend on many variables, property state being one of them. Vacations homes are also permitted but will require a minimum of 10% down payment.
Not all mortgage lenders and banks offer the same suite of mortgage loan options. This means if you talk to your mortgage company and they require a 20 percent down payment, some may offer better options. There are some very competitive 80-10-10 and 80-15-5 mortgage loan options as well as single loans with just a 5 or 10 percent down requirement.
When it’s time to finance your luxury home, know you have might have more options than you might think. Buyers can read all the loan limits and credit requirements on the Jumbo Purchase page. There are also some helpful refinance options for homeowners that currently have a jumbo loan in search of interest rate reduction or cash -out options.
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