Jumbo Loans

Jumbo mortgage loans are, literally, big loans often referred to as nonconforming loans. Unlike adjustable rate mortgage loans and fixed rate mortgage loans, jumbo mortgage allow companies to loan higher amounts than the industry-standard definition of loan limits. Acceptable loan limits are determined and defined by secondary market lenders, Fannie Mae and Freddie Mac.

Currently, loans in excess of $417,000 are considered jumbo loans. Jumbo loans are not eligible to be purchased by Fannie Mae or Freddie Mac, and are therefore generally accompanied by higher interest rates.

Since the size of jumbo loans are greater than typical loans, there is a larger risk for lenders; to reduce the risk of missed payments, average interest rates for jumbo mortgage loans are greater than more traditional mortgages. However, interest rates vary based on property types and specific mortgage amount.

Despite the higher interest rates, there are positives to applying for jumbo loans. Jumbo loan borrowers have the ability to spread payments over a longer payment period, thus lowering monthly payments significantly. Also, some borrowers have the option to defer repayment of principal during the first few years.