Can a smaller down payment also give you a lower mortgage interest rate? Eligible borrowers sometimes get a lower rate when they borrow more than the conforming loan limit and utilize Portfolio JUMBO Loans.
Portfolio JUMBO Loans
With today’s rates, buyers look for savvy loan strategies with better interest rates. While some pursue Adjustable Rate Mortgages (“ARMs”) most overlook a great option. The option of putting less down and borrowing more than the Conforming loan limit.
A Portfolio Jumbo loan is a loan at least $1 above the maximum Conforming Loan limit. Portfolio Jumbo loans are not guaranteed to produce a lower rate. However, for the right borrower in the right situation it is worth exploring. Many think a lower down payment and higher loan amount equal a higher interest rate. However, that is not always the case.
The Right Mix of Down Payment, Price and Loan Amount
Not every homebuyer can benefit from looking at Portfolio Jumbo loans. First, a Portfolio Jumbo loan has some basic requirements. They typically include:
- Loan amount at least $1 over the max Conforming loan amount
- Down payment of at least 10% for Owner Occupied homes
- Acceptable minimum credit score
As a result, only certain borrower’s in specific scenarios fit into the Portfolio Jumbo loan mold. For those that do, looking into as an alternative to Conforming loans is a worthy exploration.
Before putting 20% or more down to squeeze into a Conforming loan consider the alternatives. Some buyers could benefit from putting down less and keeping their loan amount above Conforming loan limits.
Benefit of a Portfolio Jumbo Loan
Ultimately, the benefit of looking into a Portfolio Jumbo loan is that the rate may be lower. Over the life of the loan this can save borrowers quite a bit in interest.
Additionally, borrowers shifting to a higher Portfolio Jumbo loan for a better rate can still recast. Recasting allows borrowers to pay down their loan amount after closing. Their payment is recalculated off the new lower loan amount using the same interest rate from the original loan. Ultimately, they end up with a lower rate AND the lower loan amount and payment desired.