Jumbo Loans

Written By: Administrator

Created: 10-31-09 5:38 pm

Jumbo loans is also called jumbo mortgage and it is actually a loan amount which is higher than the conventional loan amount. The standard of loan amount is set by the two largest secondary market lenders in the US by the name of Freddie Mac and Fannie Mae. Such type of loans is generally offered by the authorized agents of these two organizations. The jumbo loans will apply when the other agencies are not able to cover the full amount of the loan. The two organizations mentioned above purchase a bulk of the residential mortgages in the United States. They are also responsible for setting a limit to the maximum dollar value of any loan that can be purchased from an individual lender. The country limit is $417,000 while the limit in some places such as Hawaii and Guam is $625,500.

 There are other large investors as well such as commercial banks and insurance companies that will step in to complete the requirement and the maximum mortgage amounts that they can afford are about $1 to $2 million. A loan that is in excess of $650,000 is called the super jumbo loan or mortgage. The average interest rates of such type of loans are greater than the conventional loans as the risks involved with lending such loans are also higher. As mentioned before, the jumbo mortgages are associated with larger risks than conventional loans because if the mortgage borrower defaults then it is difficult to sell the luxury house for the full price. The luxury prices are also more vulnerable to the highs and lows of the market. Hence lenders would like to have a higher down payment in case of jumbo loans. In case of jumbo loans, there may be two appraisals required by the lenders of the property as they can’t be easily sold to the mainstream borrower.