Home Buying in Hillsborough>Question Details

Steve Thomas, Home Buyer in West Orange, NJ

Loan Above and Below $417K

Asked by Steve Thomas, West Orange, NJ Sun Jun 30, 2013

My mortgage advisor says that if I have my mortgage amount of $417K or less, I will get a better rate than the mortgage amount above that. I know that somerset county is one of the high cost areas and the jumbo loan limits are above $417K.

My mortgage advisor says that that is not necessarily the case as there are a lot of private investors who might be buying the mortgage.

Do you think going to a community bank will get me same interest rate for loan amount of around $500K in a high cost area as that of $417K?

Thanks for your response!

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Our Portfolio pricing is currently better than our Fannie Mae pricing. Please call or email below.

Greg Bleyl
NMLS 117969
0 votes Thank Flag Link Tue Aug 20, 2013

Somerset County has a maximum conventional loan limit of $625,500. Any loan amount over $417,000 is considered "Super-Conforming" or "Agency-Jumbo." With most lenders, there is a very slight rate increase. However, there are also lenders which I work with who will not impose such a rate increase. It all comes down to the specific lender, whether they sell their loans to Fannie Mae and/or Freddie Mac, and their guidelines.

My advice would be to choose a lender who offers a "float down option" for your rate. I say this because rates have been moving more frequently than usual (both up and down). Lock your rate to protect yourself against unforeseen market shifts, and if rates were to improve after you lock you'd still have the ability to obtain the lower rate. Essentially, it's the smartest move you could make and many banks simply don't offer this option.

If you'd like me to compare mortgage pricing for you, I work with just over two dozen lenders which simplifies the entire process and ensures you receive that great rate that you deserve. To speak further, please call or email me at your earliest convenience.

Kindest regards,

Paul F. Marzolla
Sr. Mortgage Consultant
(201) 957-6768
0 votes Thank Flag Link Mon Jul 1, 2013
community banks done have any adavantes. We are on of the states largest co. Feel free to give me a call and I can do my best to give you a better rate than both.
0 votes Thank Flag Link Mon Jul 1, 2013
I'm going to expand on what Gerald was discussing below. The following may not be applicable to your specific scenario, but may help.

The pricing on rates has been a little crazy as of late. We are seeing Agency (Fannie and Freddie) ARMs yield lower rates on the 7/1 than the 5/1, which is not typical. We are seeing some days where the Agency high balance >417K<625,500 ARMs are pricing better than the conforming ARMs (<=417K). The point I'm making is that you can actually get a rate on a high balance, or even jumbo, that is less than the rate on conforming loans.

The loan that I am finding is pricing best (at least for JPMorgan Chase) is the non-agency (does not get sold to either of the agencies and is portfolioed by Chase) 7/1 interest only ARM. You need a loan >625,500. The rate has been 0.5 - 1.25% lower than any if the Agency ARMs recently. If your scenario allows you to take a higher loan, you could have the note drawn at 625,501, then pay the principal down with no penalty to bring the loan to a more comfortable figure after closing after you locked in the lower rate that wouldn't be available on the lower loan amount. A few things to understand:
1. There is no penalty for principal curtailment
2. The payment on interest only is recalculated monthly based on the balance
3. This technique might not be applicable to all scenarios. You need to be purchasing a property with a value that can support a loan of 625,501 at 70-80% loan to value (depending on credit score and property type).

What it comes down to is that you need a good mortgage banker to discuss all if the options and have an understanding that with the market being so volatile, the loan products and pricing can change intra-day, so until you lock, nothing is set in stone.

If you have questions around this posting or regarding any other mortgage related questions, call or email me.

Ryan McPartland
Mortgage Banker
Chase Private Client
646-522-6340 cell
0 votes Thank Flag Link Mon Jul 1, 2013
417,000 is the conforming loan limit for Somerset, with loan amounts >417,00 and < 625,500 considered Super Conforming or High Balance. Jumbo would be >625,500. A Broker, or a Corespondent Banker(such as myself), needs to follow overlays and make certain the loan is salable after closing conforming to either Fannie Mae or Freddie Mac guidelines as well as the end investor the loan is being sold to.
It is very possible that you may find a Community Bank that will hold the loan in their portfolio if you are a strong applicant and there is little risk of default. If that is the case, it is also likely that they will offer a rate that brokers or bankers can not since they will not retain servicing of the loan.
0 votes Thank Flag Link Sun Jun 30, 2013
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