What is a Jumbo Loan or a Jumbo Mortgage Quite simply it is a loan that does not conform to the guidelines established by Fannie Mae or Freddie Mac or exceeds the conventional loan limit is called a Jumbo mortgage loan. In most states, home loans that exceed $417,00 to $1,000,000 are considered Jumbo Mortgages. Jumbo Mortgages carry slightly higher interest rates than conventional home loans. This is because when any loan is sold to an investor it is packaged in bundles of several million dollars. For example an investor might purchase a loan bundle that is valued at 3 million dollars. In that bundle, lets say that there are 12 mortgages for $250,000.00 each. If one of those loans defaults, the default ratio would be 1 out of 12. When a jumbo loan bundle is sold, that 3 million dollar bundle may only contain 4-5 loans. In this case if one of those loans defaults the ratio increase to 1 out of 4. Hence the risk is greater for the investor. The greater the risk, the higher the rate. 2006 Jumbo loan limits As with the growth of the housing market, the average median price of homes increase steadily throughout most of the United States. A home that would have been considered conventional just a few years ago now demands a higher price. Jumbo loans adjust their limits regularly to meet the demand of rising housing prices. Currently the jumbo loan limit for a one family home is 417,000. For properties in Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the limits are 50 percent higher. Why do you need to know this' Once you know your loan is classified as Jumbo or Super Jumbo, you need to ask different questions. From the first conversation you have with your lender, you need to make certain that he or she knows you need a jumbo or super jumbo loan. You need to be prepared for having at least two appraisals on the property, and potentially providing more documentation than other loan programs. You need to make certain that your lender has the proper resources to offer you competitive jumbo and super jumbo financing. Super Jumbo Mortgage A loan amount over $1 Million is classified as a "super jumbo" loan. Most lenders do not offer residential mortgage financing for Super Jumbo loans, and some lenders only do Super Jumbo loans. As with a jumbo loan, documentation requirements, interest rates, and review processes are generally different and more demanding on super jumbo loans than "conforming" loans, due to the amount of money involved. This type of loan does usually require excellent credit. |
