Jacksonville Jumbo Purchase-Refinance: A jumbo mortgage is so-called because the loan amount is above the local conforming loan limit. Here in Jacksonville – Duval County, the limit is $453,100. Such loans are either conventional or government-backed. The maximum conventional conforming limit is $453,100 and the maximum VA loan in Jacksonville is also $453,100. USDA loan limits are established by the USDA and are approximately 115 percent of the median home value in the area and must also be located in rural or semi-rural areas. FHA loan limits also vary by county. Yet while a jumbo loan can either be for a purchase or a refinance there are some small, yet important differences.
When appraising a subject property while in the process of evaluating a jumbo mortgage application, if the application is for a refinance, the appraiser compares the subject property with similar homes in the area. The properties must be similar in nature. You can’t use a condominium unit to justify the value of a single family luxury home for example. An appraiser is typically required to find at least three and sometimes four recent sales of similar properties in the area that have occurred within the previous 12 months. The property being refinanced is also physically inspected both on the interior and exterior. Recent sales of other homes are only inspected on the outside, not the inside.
In a purchase transaction, while the subject property is appraised on the interior as well as the exterior, in addition to recent sales in the area, the sales contract showing the agreed upon price is used as a basis. Both the sales contract and the appraisal will show a value of the home. The sales price can sometimes be different than the appraised value. For example, the sales price might be listed as $700,000 yet the appraised value comes in at $710,000 based on recent sales in the area. What does a lender do in such a situation? Is the additional value of the home used as part of the down payment? No, it is not.
A jumbo lender will use the lower of either the sales price or the appraised value when establishing a loan amount and a down payment. For example, consider a luxury home in Jacksonville: The sales price is $700,000 and the buyers want to put 10 percent down. The appraiser lists four homes in the same development that have sold within the previous year and concludes the value is $702,000. The buyers don’t get to claim that additional $2,000 as their own because the lender uses the lower of either the sales price or appraised value in a purchase. In this example, the value is $700,000, not $702,000 and with a 10 percent down payment the loan amount will be $630,000.
When refinancing an existing jumbo loan, there is no “lower of” value, only the amount shown on the appraisal report comparing the subject property with recent sales of similar homes is used. If the value comes in higher than expected, the owners can borrow more yet cannot do the same with a purchase.
Let’s now look at what happens when the value of a purchase comes in lower than the sales price. In this example, the sales price is $700,000 but the appraised value comes in at $690,000. If the jumbo loan requires at least a 5 percent down payment, the loan amount would then be 95 percent of $690,000, not $700,000. This means the borrowers must decide whether to come to the closing table with the $10,000 difference between $700,000 and $690,000. In most instances, the buyers have the ability to cancel the offer and still get their earnest money deposit back. The main difference between an appraisal for a purchase and a refinance is the presence of the “lower of” guidelines.
Five Stars offers a verity of Jumbo purchase and refinance solutions for borrowers nationally. Please look under the loan program section for more information. Interest rates have recently dropped to historic low levels, contact us today to learn more. Call ph: 800-871-2636 or just submit the Request Contact form found at the top of this page.
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