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Financing

Before You Buy a Bigger House, Consider These 3 Things

Bigger is better and better is bigger, or so the saying goes -- especially among young home buyers.

If you're in the market for a larger housing purchase, you may need to consider a jumbo mortgage. Jumbo mortgages are home loans that are bigger than "average." That amount varies by geography, but in most housing markets the loan amount is more than $417,000 for a single-family home. Also, homeowners with jumbo mortgages tend to move more often.

With home values on the rise, many buyers may need to seek jumbo loans for financing. If you're thinking about a jumbo mortgage be sure to consider the following:

1. Choose the right mortgage

If you're not looking to own your home for an extended period of time, an adjustable-rate mortgage may be the best fit for you. Adjustable-rate mortgages can save you money with an interest rate that's guaranteed for your loan term. It's typically a lower rate than a 30-year fixed, and can be a great option for buyers who are looking to maximize cash flow for their current financial needs.

Fixed-rate loans have a higher interest rate, but they provide security by locking in payments over the span of your loan.

2. Explore refinancing options

Payback financing options, or piggyback options, allow for a second mortgage or home equity loan to be taken out by a borrower at the same time the first mortgage is started or refinanced. Whether you're combining a first and a second mortgage to reduce cost, taking out a home equity loan for home improvement, or need cash to fund a big expense such as college tuition, lenders such as TD Bank have many offerings that can meet borrowers' needs at various times throughout their lives.

3. Research qualification requirements

Be prepared -- qualifying for a jumbo mortgage does require stronger credentials.

Though the process can be more rigorous, some financial institutions such as TD Bank treat jumbo mortgages as they treat other mortgages, and review all submitted documentation as quickly as possible. Mortgage underwriting is the process a lender uses to determine a borrower's risk (for example, a borrower's credit, capacity, and collateral). A quick underwriting process allows buyers to close sooner or move faster when making an offer on the property they are looking to buy.

The housing market is improving -- increased home values and lower interest rates will mean lower monthly payments. If you're looking for a larger space to accommodate your growing family, consider beginning your home-buying process now. When looking into lenders, consider a lender who can offer flexible terms and lending guidelines to best fit your unique borrowing needs.

Scott Haymore is the senior vice president, head of Pricing and Secondary Markets for TD Bank. He is responsible for setting daily mortgage rates and for secondary mortgage market purchases and sales. Haymore has 20 years of mortgage, finance, and capital markets experience.