Real estate market

There are ways to minimize the higher interest rates of jumbo loans. Unfortunately, most lenders prefer to keep this a profitable secret.
Obviously, the buyer can always make a larger down payment so that the loan amount finally required fits within the conforming limit. Depending on the sales price of the home, however, this can prove to be a very expensive approach.
A more advantageous approach is to purchase the property with two mortgages: a standard conforming first mortgage and a second mortgage loan. This is a perfectly legal method in every state that allows home equity loans.
In this scenario, the first mortgage is a standard conforming program with a loan amount at the maximum limit. The second mortgage is for whatever amount the buyer needs to cover the difference required for financing. For example, consider that Ivana wants to buy a $500,000 property, and she only wants to make a down payment of 20%, or $100,000. She could obtain a jumbo loan, but their interest rates are typically 0.25 to 1.00 percentage points higher than conforming loan programs. If the jumbo rate on that $400,000 loan was 8.75%, her monthly payment would be $3,146.80.
Instead, she obtains a conforming first mortgage of $240,000. She then obtains a purchase second mortgage of $160,000; the two mortgages combine for necessary $400,000 in mortgage financing.
If the conforming rate were only 8.00%, the monthly payment would be $1,763.98; and if the second mortgage were a 30-year at 8.50%, that monthly payment would be $1,232.92. Thus, her total combined mortgage payment would only be $2,996.90.