What makes a Mortgage a Jumbo Mortgage, and When Should You Consider One?
By: Nicole Gates
Home loans fall into two broad categories based on size of loan: conforming loans and jumbo loans. Conforming loans top out at $417,000 (with a few exceptions due to high cost geographies). This amount is set by the Federal Housing Finance Agency (FHFA), and conforming loans are eligible to be purchased by Fannie Mae and Freddie Mac, two government sponsored enterprises that help to make more funds available for mortgage lending to home owners.
Home loans that are over $417,000 (again, with some exceptions) are called Jumbo Mortgages, or non-conforming loans.
A Jumbo Mortgage may be a great choice for you if…
• Home prices in your area are high. You might not be left with many other options due to the high-value real estate in your area.
• You have a salary that can afford larger monthly interest payments, but don’t have enough for a down payment that would put your loan amount within the conforming loan range. As long as you feel comfortable with the larger monthly payments, a jumbo mortgage could be a great fit for you.
You don't have to worry about not having enough options if you decide on a jumbo mortgage. Jumbo mortgages are available in many different choices, including:
FHA (in certain states)
Additionally, when you take out a jumbo mortgage and make on-time payments, you may be able to build your credit history and improve your credit score.
When considering a jumbo mortgage, you should be aware of these aspects as well:
• Jumbo mortgages typically have a higher interest rate than conforming loans with similar terms, due to the loan being a higher risk for lenders (as these loans can’t be purchased by Fannie Mae and Freddie Mac).
• In addition, it may be more expensive to refinance a jumbo mortgage, mainly due to higher closing costs.
If you think a jumbo mortgage is right for you, you can get your application started now with Guaranteed Rate. Or call one of our jumbo home loan experts at 866-934-7283.
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