Jumbo Loans: Unique Mortgage VariablesIf you are looking at taking out a loan for a large amount of money to purchase a home, then you have certainly heard about a type of loan called a "jumbo loan". Even if you have been told that this is the type of loan that you need, you may not know exactly what this means in terms of your specific loan. The ParametersCurrently, any mortgage that is in excess of $417,000 is considered a "jumbo loan". The reason that there is a difference in these loans and smaller loans is that loans that are smaller amounts, called conforming loans, are within the guidelines to be sold to Frannie Mae and Freddie Mac. These two secondary market mortgage companies are the largest in the nation and are ran by the government. If your loan exceeds the $417,000 limit set by Frannie Mae and Freddie Mac, then they are called non-conforming loans or "jumbo" loans. You will find that these larger loans will be harder to be approved for because lenders will have to assume all the risk themselves since they can not be sold to Frannie Mae and Freddie Mac. Since lenders do consider these jumbo loans more risky, you will notice that they come with a higher interest rate, even if your credit is very good. In fact, most lenders require that you have a credit score of 700 or more just to qualify. In addition to these high standards for credit scores, they will also require a 10% down payment on the total amount of the loan. Super Jumbo LoansThere are some exceptions to these rules set by Frannie Mae and Freddie Mac however. Some counties are what are considered to be a "high cost housing market". These counties can be found in California, Florida, Georgia, Washington and parts of Arizona. In this case, they may be able to purchase loans on homes for up to $729,000. Whether or not an area is considered a high cost housing market is determined by the county and the average home selling price in that county. An "agency conforming loan" or "super conforming jumbo" loan is one that is more than the limit of $417,000 but does not exceed the county limit. Jumbo Loan LimitsThe Federal Housing Finance Agency, which regulates Frannie Mae and Freddie Mac will annually review these limits to make any necessary changes in the loan limits. This agency uses the national average home price to determine what the limit should be in each area and while it does have a tendency to rise, it will never be lowered. |
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