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Jumbo Loans?
Can anyone help me with this? I am so confused.
Here is the background - we live in a HCOL, and we are looking to buy a house once we have our DP saved. I believe the general limit for a (conforming?) loan is $417K. Therefore, if we have the minimum 5% DP, we can only get a house up to $439K, correct? Anything higher than that, and we need to have a DP high enough so that the mortgage is still under $417K. Does this mean that if we get say a $600K house, we would need a DP of $183K (600-417), which would be 30% down? And if we just have 5% DP but the loan is over $417K, is this considered a non-conforming mortgage (jumbo loan), which would generally have a higher interest rate and/or more fees? We are relatively high-income earners with steady jobs and have good credit scores.
Given that we are in a HCOL area, I think the limit for the conforming loans is higher in certain areas. So Fairfield County, CT has the same rules as above except the limit is $601,450. So we could get a more expensive house, but obviously pay more in taxes and COL.
I appreciate any feedback. How do people buy a house in this area without a $200K down payment?? (rhetorical). This is frustrating!
Re: Jumbo Loans?
I'm not familiar with jumbo loans, but you made me curious. I did some reading on it, and it seems to me like you have two options: Get a jumbo loan or get a conforming loan that is under your area's limit. My understanding is that to qualify for the conforming loan, you would have to have the 5% DP and/or the difference between the home amount and the limit amount in your area (whichever is greater). So it seems you are correct in saying you would need $183 for a $600 house in a $417k limit area. Of course, this is to qualify for a conforming loan, so if you compare the two... you may find it worth it to get a jumbo loan. I would get with a lender to compare the two and figure out which is best for you.
All of that said, I think most people here would advise you to not buy a house unless you have a 20% DP. I get that living in a HCOL is tough, but maybe there are some smaller, more affordable homes in your area? We too live in a HCOL area, so we bought a two bedroom 1200 sq ft home as our starter house. I'm so happy we went small. Not only do we feel comfortable with the mortgage payments, but we have found that all other expenses are less expensive too. For example, it only cost us $5k to roof the whole house...it would have been double that if we lived in a more normal sized home!
Thanks. I realize I am coming off pretty immature and impatient in my post. We definitely have house fever, and we have 2 girls so we want to finally feel "settled" before they are too far into their school lives so we don't have to uproot. I know plenty of people have moved and kids have lived to tell about it though
I am definitely going to try to save up as much as possible, and buy an affordable home. I am a planner (as most people on the board probably are), and have my spreadsheet of when we'll have our DP saved up. I was having trouble figuring out all of these nuances but I think that makes sense. Now I just need to stay off of Zillow and resist the temptation
I don't run into jumbo loans. I am in a MCOL area (New Orleans). But trying to pigeonhole a $417K amount across a huge country with a wide variety of economies, just sounds crazy. There are a lot of areas in this country where there is not much you can buy below that. And then other areas where you can buy a sprawling mansion, a pool, and a tennis court and still have money left over.
I take that back a little. There are quite a few properties in NOLA above $417K...but they are either in the French Quarter or are large houses in the better neighborhoods.
Off on a political tangent again. The post made me think about that the average price of a home here is $323K. But that is SUCH a skewed number. 90% of the home values are below that...most are way below that. But we are such a city of "haves" and "have nots". The multi-million dollar homes in two very specific areas artificially raise that average. I don't begrudge the "haves"...I just wish we had a whole lot fewer people living in poverty.
We're planning on putting $100k down and taking out a jumbo loan (although I've had a hard time finding out what the adjusted limit is for DC). We're also looking at 80-10-10 loans to avoid PMI and take advantage of our high income now, while reserving the option for lower payments if I leave the work force and/or H leaves the firm for a lower paying job.
Wow! I'm sorry to hear that it is so expensive there! Sorry to add to your frustration. Best wishes on your house hunt!
Wow! I'm sorry to hear that it is so expensive there! Sorry to add to your frustration. Best wishes on your house hunt!
**********iamabox**************Thanks. If we really found it intolerable we could leave, but as frustrating as it can be DC is a great city to live in and is 100% the best place for our respective careers. It may be some day that we decide we'd rather have a lower cost of living and give up what we have here, but for now we're putting up with the negatives (and whining on the internet).
Thanks!