There is often a lot of confusion as to exactly what a jumbo mortgage really is and when it is required. Being knowledgeable about the different types of mortgage loans and their lending limits will help determine when jumbo mortgages are necessary.

Conforming loans, otherwise knows as conventional loans, are those that are eligible to be purchased by Fannie Mae and Freddie Mac. The current conforming loan limit for single family homes is $417,000 in most areas of the country. In high cost areas, the conforming loan limit can be as high as $625,500. According to Freddie Mac, these loans with higher maximum loan limits that are permitted in certain high costs areas are called Super Conforming Mortgages. These same loans are called High Balance Loans according to Fannie Mae.

Any mortgages above the $625,500 or high cost limit of an area is considered a Jumbo Mortgage. For instance, in San Diego, Ca. the high balance conforming loan amount is $546,250 and in New York, NY it is $625,500. Anything above these amounts for these areas would require a jumbo mortgage.

Jumbo mortgages are not government insured and are not eligible to be purchased by Fannie Mae and Freddie Mac. Very often, jumbo mortgages are held within a lender’s portfolio which is the reason that these have stricter guidelines that must be followed. Mortgage interest rates for jumbo mortgages are generally somewhere around 1% higher than conforming mortgages. As mortgage rates for conforming loans have been at record lows, the same can be said for jumbo mortgage rates. Current jumbo 30 year fixed mortgage rates are at 4.750%, jumbo 15 year fixed mortgage rates are at 4.375% and jumbo 5/1 adjustable mortgage rates are at 3.250%.

Understanding the difference between high balance loans (also known as super conforming mortgages) and jumbo mortgages is the first step to knowing what type of mortgage is needed. Then finding out the high cost limit of the location of the property is the next step in determining when jumbo mortgages are necessary for the purchase of a home or refinance of an existing mortgage.

 Source: By: Rosemary Rugnetta, www.freerateupdate.com

 

Dy Associates is an Oakland Real Estate company specializing in commercial, home and investment property in the Oakland and East Bay Area. We provide real estate services including buyer agent, seller agent, short sales, commercial and investment aquisitions, loan facilitation, hard money lending, proerty management. Articles are provided as information only. We do not provide legal or general investment advice.