Jumbo
Loans are mortgages with a loan amount above
conventional loan limits. Jumbo Mortgages
apply when agency limits don't cover the
full loan amount.
Fannie Mae (FNMA) and
Freddie
Mac (FHLMC) are large agencies that
purchase the bulk of residential mortgages
in the U.S. they set a limit on the maximum
dollar value of any mortgage, which they
will purchase from an individual lender.
This
leaves a portion of the market to look
elsewhere for placement. Other large
investors, such as insurance companies and
banks, step in to fill the need with maximum
mortgage amounts going to the $1 million or
$2 million range. The average interest rates
are typically greater than normal for
conforming mortgages, and vary depending on
property types and mortgage amount.
The conforming limit is a mortgage amount
set by
Congress, the conforming loan limit is
set every January and is the maximum loan
size eligible for purchase by either Fannie
Mae or Freddie Mac, two Federally chartered
organizations who purchase the underlying
securities from mortgage originators. Those
funds are reinvested in new mortgages
completing the flow of funds cycle. Jumbo
Rates can vary for a few parts of the
country however, this is the general rule.
The current conforming limit is set at
$417,000. Any loan amount above that figure
is considered a Jumbo loan and is often
subject to an interest rate pricing premium
as well as to some additional underwriting
restrictions. A common strategy to lower
overall interest costs if your purchase or
refinance balance is above $359,650 is to
use a combination of both first and second
trust money, referred to as an 80/10/10,
80/15/5 or 80/20. Every situation is
slightly different, but it is one more
option to consider.
Terms
-
Fixed- The term is usually for 15 or 30
years although it is commonplace to set
other terms. Interest rate will not
change for the life of the mortgage.
For
Current Interest Rates
-
ARMs- Adjustable Rate Mortgages are
loans with a fixed rate for a time
period usually 1, 3, 5, 7, or 10 years
followed by an annual interest rate
adjustment. They are usually expressed
as 1/1, 3/1, 5/1, etc. Following the
initial fixed period, the new rate is
determined by adding a margin to an
index.
For
Current Interest Rates
When does a Loan Becomes a Jumbo
When a loan amount is higher than the
conforming limit, it becomes a Jumbo Loan,
or non-conforming loan, with slightly higher
Jumbo Loans, combined with historically low
mortgage rates, can bring greater
flexibility for some home buyers to purchase
the house they want and make the payment
they want.
With interest rates so low, consumer
interest in Jumbo Loans is very high. If you
are interested in finding out about securing
a high end home without the jumbo mortgage
rate, or getting your Jumbo Loan with a low
(or no) down payment
contact us.
