Looking to purchase a bigger home?

Looking to purchase a bigger home?

NEW YORK (CNNMoney) — The Federal Reserve is about to give even more detailed forecasts about where it expects its key interest rate to be years from now.

With the economy slowly improving, some folks have entertained the idea of upgrading their largest investment… their home. With property values way down from their record highs just a few short years ago it’s no wonder why folks have decided that now is their best chance to buy that million dollar home for a fraction of the price. Some people assume that when buying a larger home, they will have to finance it with a jumbo loan and therefore pay a much higher rate than the standard low conventional mortgage rates.

Jumbo loans are those loans that are above $417,000. Conventional loans are loans that are $417,000 and below. It is true that once you go above $417,000 the interest rates rise and they are typically about .75% to 1% higher than a conventional loan. Jumbo loans also do not carry mortgage insurance so most of them require at least a 20-25% down payment.

Fortunately, there is a solution to avoid having a jumbo loan with a much higher rate. Splitting up the mortgage into two loans will max the first mortgage out at a $417,000 loan size. If you do this in conjunction with an equity line or second mortgage on the difference, your rates will be much lower.

For example, if you are purchasing a home for $650,000 and decide to put 25% down then you would be financing $487,500 which would put you on a jumbo loan and you would have an interest rate of about 4.875% – 5.0% on a 30yr fixed rate mortgage and your monthly principal & interest payment would be roughly $2600.

Now if you take that same loan amount of $487,500 but split the mortgage into two loans you would have a first mortgage at $417,000 and a second mortgage at $70,500 and your combined monthly payment between the two would be roughly $2330, which is a monthly savings of $270 when compared to just doing one jumbo mortgage. The other advantage of splitting them into two loans is that the second mortgage is relatively small in comparison to the first mortgage so some folks may want to pay extra and concentrate on getting the second paid off. This would leave you with just the first mortgage which would drop your monthly payment another $340 and you would be left with one monthly payment of $1990, which is pretty good on a $417,000 loan size.

If you would like to see if you qualify for a larger home but have concerns about how to finance it, please give me a call today and I would be more than happy to go over your options and do a free analysis of your financial situation to see which mortgage would best fit you. To learn more about this product or any other mortgage product, please feel free to call Dan Longman, President of Priority Lending Corp, at 954-438-3776 ext.11 or email me at Visit us online at