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Jumbo loans

Mortgage loans above the maximum 417,000 mortgage loan amount (established by Freddie Mac & Fannie Mae), are known as ‘jumbo’ mortgage loans. Because jumbo mortgage loans are bought & sold on a much smaller scale, they often have a higher interest rate than conforming mortgage loans, but the spread between the two varies with the US economy. Also jumbo mortgage loans are not funded by FHLMC or FNMA, they usually carry a higher mortgage rate, and require some additional underwriting guidelines. A strategy to lower your overall principal/interest payments is if your mortgage balance is above $417,000, then you can a combination of both 1st and 2nd mortgages, referred to as an 80/20, 80/15/5 or 80/10/10.

Jumbo mortgage loans are a higher risk for mortgage lenders. If a jumbo loan forecloses, it is harder to sell the luxury residence quickly at the full price. Jumbo mortgage loans are more vulnerable to market highs and lows. That is one reason jumbo mortgage lenders prefer to have a higher down payment from jumbo loan applicants. Luxury home prices can be more subjective, and not as easily sold to a mainstream borrower, therefore many mortgage lenders may require at least two appraisals on any jumbo mortgage loan.

The mortgage interest rate charged on jumbo mortgages is generally higher than conforming mortgage loans, due to the higher risk to the mortgage lender. It can vary between 0.5% to 0.75% higher than the normal conforming mortgage loan rate.

Jumbo mortgage loan programs are similar to traditional mortgage loan programs. They require a higher down payment, usually of an additional 5% for similar loan programs. Zero down programs are generally not available, but instead require a minimum of 10% down payment for a jumbo mortgage loan. Because the mortgage loans are large, jumbo mortgage lenders frequently offer variable mortgage loan programs to the jumbo borrower. The risk of an mortgage interest rate increase can result in a large dollar amount increase. Generally, adjustable rate jumbo mortgages are popular due to the low monthly payment.

Any mortgage home loan in the excess of 1 million – 10 million is considered a Super Jumbo Loan. Most millionaires take out these mortgages to enjoy the tax write offs. These types of mortgages help to purchase high end homes such as vacation homes, lakefront houses, beach homes, upscale condos, luxury homes, and investment properties. All Super Jumbo loan underwriting guidelines will vary per Super Jumbo lender. Most Super Jumbo mortgage lenders required 20-30% down which varies by loan amount. Super Jumbo mortgage rates are generally higher than your normal Jumbo Loans.

A Conventional Jumbo loan was set forth by the new Fannie Mae limits which allow the Jumbo limits to go up to 729k in ‘certain counties’. Not all counties were affected by the new increase.