A solution to those spendy jumbo loans

The conforming loan limit in our area is $417,000.  This means, any loan amount above that, independent of how big your down payment is, qualifies as a jumbo loan.  Jumbo loans are expensive with higher interest rates and fees. 

In the boom years, there were a variety of loan "products" available to circumvent the jumbo limit.  As a general class, the second mortgage was the most popular and easiest tool buyers could use to avoid taking out a jumbo loan.   In the downturn, virtually all loan products disappeared but for the most standard of loans; FHA, VA, conventional and jumbo.  As lenders are gaining back some confidence in the market, they have brought back the "second". 

Here is how it works.   The buyer borrows the $417,000 allowed as a conventional loan, and then takes out a second loan to close the gap to their purchase price.  So it would look something like this:

$750,000 purchase price
-$150,000 down payment
$600,000 financed
-$417,000  conventional loan
$183,000 second loan

Now, the interest rate on the second does tend to be higher than that on the conventional loan,  But it is higher only on that $183,000 balance.  Not the whole $600,000, as would be a jumbo loan. 

For some, the jumbo rates and fees were rather prohibitive, such that folks opted not to move, or to use retirement or other savings.  I expect we'll see many "move up" buyers using these loans to facilitate getting them into their next home. 

Is it advisable?  That is, if the jumbo was a financial strain, maybe a move up is reckless.  Or does the second loan, keeping the overall cost lower, make such a move smarter?

Give me a call if you have questions about what loan programs might work for your particular situation.  I'll glad answer what I can, and refer you on to one of the reputable lenders with whom I work.  503-312-8038.