How to make a jumbo loan a conventional loan and save

In the Texas the conforming limit is 417k, this means any loan 417k or lower qualifies for a conventional loan and the lower conventional mortgage rates. In Texas, we are very lucky in that there are a number of options for jumbo purchase amounts.  One of these options is to turn a jumbo non conforming loan into a conventional first lien with a piggyback second lien. Let’s look at a couple of examples. Let’s assume a purchase price of 575k. You could structure this loan with a 417k conventional loan with a 129k second lien. This would accomplish two things: It would allow you to take advantage of the historically low 30 or 15 yr fixed conventional rates and it would allow you to put down as little as 5% on a jumbo purchase price that typically require at 10% down payment with but, at least 20% with most lenders.

Another example that can be advantageous is even if you have the 20% down payment the “split” loan might be beneficial.  As an example, if you are buying a 750k house, putting down 20% for a financed amount of 600k. In this case, you can finance 417k at record low levels, and then take a second lien for 183k. In a lot of instances, the “blended rate” or the interest rate across both liens is lower than or equal to the rate you can get on a one lien jumbo non-conforming loan. A second potential benefit is that typically closing costs on the split loan are a bit cheaper and finally you can aggressively pay off your second lien leaving yourself with only the relatively low first lien mortgage payment.

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