Mortgage Advisors

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Jumbo Mortgage

A jumbo mortgage is a mortgage with a loan amount that exceeds the standard conventional conforming loan limits. This amount is set by Fannie Mae and Freddie Mac. Jumbo mortgages are used when agency limits do not cover the full loan amount. Jumbo mortgage loans are risky for lenders because if the loan defaults, it is harder to sell an expensive residence for full price, and such residences are also more susceptible to market fluctuation. Lenders typically prefer to obtain a higher down payment, usually a minimum of 5% down, from borrowers who desire a jumbo loan. Jumbo loan home expenses are often subjective and many lenders request two appraisals for a jumbo loan home. Jumbo mortgage interest rates are often higher than conforming loans because of the risk to the lender. The interest rate for a jumbo loan is usually 0.25% to 0.50% higher than a regular loan. In recent years, jumbo loans have become more popular because of the increase in housing prices.