When I am asked to do a jumbo mortgage rate quote, I usually ask the potential borrower if I can give them a call back. Why? Because I have to go through a list of factors that determine what the rate will be.
As a matter of fact, there are eleven factors I know of that have to be considered when determining a jumbo mortgage rate:
#1 - FICO score - many loan programs either subtract from their base rate for higher credit scores and add to their base rate for lower credit scores. The cutoffs are usually in increments of 20. For example scores of 700, 720, 740, and 760 are used as cutoffs.
#2 - Loan amount - the loan amount is a factor in the rate quote. Higher loan amounts will usually increase the rate.
#3 Loan-to-value percentage (LTV) - The rate will be higher with a higher LTV than it would be with a lower LTV. Thess cutoffs are usually done in 5% increments.
#4 Property type - A condominium will generally have a higher rate than a single family residence.
#5 Transaction type - A cash-out refinance will usually have a higher rate than a purchase or rate and term refinance.
#6 Occupancy Type - A primary residence will usually have a lower rate than a rental property. Second homes usually fall in the middle, with a rate slightly higher than a primary residence, but less than a rental property.
#7 Impound account - also known as an escrow account, borrowers who do not want this account will usually get a higher rate.
#8 Debt ratio - some loan programs add on to the rate with a higher debt ratio. These cutoffs are usually in 5% increments.
#9 Number of units - Multiple units often have an add-on to the rate.
#10 Property location - The state, and sometimes the county, have a bearing on the rate.
#11 Rate lock period - Shorter rate lock periods have lower rates than longer rate lock periods. These periods are usually in 15 day increments.
Now let's have some fun! Let's look at what might get the best jumbo mortgage rate quote, and what might get the highest!
An 800 credit score on a loan amount of $999,950 with a 60% LTV on a single family residence that is a purchase of an owner-occupied property with an impound account and a debt ratio of 30% with a 15 day rate lock might get the best jumbo mortgage rate quote!
On the other hand, a 700 credit score on a loan amount of $4,000,000 with a 80% LTV on a condo that is a cash-out refinance of a rental property with a 45% debt ratio without an impound account on a 4 unit building with a 60 day rate lock might get a pretty high jumbo mortgage rate quote! (This one is a silly extreme and no lender would probably make this loan).
So the next time you request a rate quote from a jumbo mortgage lender, have some patience – there are a lot of factors to consider!