So you’ve found your dream home, your offer just got accepted, and now you’re ready to rock n roll by starting on the loan and securing your rate on a Jumbo Mortgage. 
Then you hear what the rate is. Yikes!
You ask your loan officer, “Listen buddy. You’re website says 5%! Why are you telling me its 5.75%, huh? You trying to screw me or what???”
“Well, Ma’am. This is a Jum…”
“Shut it, Skippy. Let me speak to your manager!”
Take a long, deep breathe before you bite the banker’s head off and get the poor kid fired.
Jumbo Mortgages are a little bit different of a beast. If you’re in the market for this type of loan, I’d like you to call 100 loan officers and ask them why Jumbo Rates are higher than any other mortgage product.
99/100 will tell you, “Ma’am- its a bigger loan amount so it involves more risk. That’s why the rate is higher.”
THIS IS WRONG!
The real reason is because of the mark-up that Wall Street charges to underwrite, securitize, and sell these types of loans.
The 2 biggest mortgage lenders are Fannie and Freddie, and because they develop HUGE pools of loans under their conforming limits of $417,000, they get charged a “wholesale rate” if you will when the go to sell them.
Think about this for a moment.
If you go to Target and buy a bag of Doritos to throw into your kiddos’ lunches, you’re going to pay retail. If you buy that same bag at Sam’s or Costco, you will buy more (bulk), but you will spend less on each individual bag.
The same thing happens with mortgages. Fannie and Freddie have alot more of mortgages that they can sell to the secondary market (Wall Street), so they don’t have to pay as much in fees.
A Jumbo mortgage is in some ways a “boutique item.” Jumbo loans are not provided by FNMA and FHLMC, rather by private investors do. I mean, not EVERYONE wakes up and buys a $4 million dollar condo in Manhattan. There is less supply and because of this, the fee assessed on this smaller pool of loans is higher, and the incremental cost per loan is more- thus…Why Jumbo Loans cost more to do.
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For more information on Jumbo Loans in Texas, feel free to contact us today.
