Jumbo

A jumbo loan is a loan in which the amount borrowed is greater than the loan limit set by Fannie Mae (FNMA) & Freddie Mac (FHLMC). A loan amount greater than $548,250, is considered a jumbo loan.

Advantages:

  • Able to finance a home that is over the maximum loan amount of $548,250 established by Fannie Mae and Freddie Mac
  • Enables a borrower to purchase “more house” such as a high price luxury property.
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How Do Jumbo Loans Differ from Conforming Loans?

We know that jumbo loans always blow the loan limit for conforming loans, so we need to know exactly how they differ from conforming loans. These differences between jumbo loans and conforming loans are highlighted in the following ways:

  • Closing Costs and Fees

    For jumbo loans, the fees and costs at closing require some extra steps for the qualification because the amount of the loan is bigger. Whereas conforming loans are easier and more affordable at closing.

  • Size

    Jumbo loans sit atop conforming loans whose limit is pegged at $510,400 most counties and $765,600 for more expensive counties. For jumbo loans, the amount is more open-ended in nature.

  • Interest Rates

    Typically, conforming loans have lower interest rates but because of the higher amount of money and the greater risks involved with jumbo loans, the interest rates charged on jumbo loans are higher. Fortunately, if you look around long enough and compare different interest rates offered by lenders, you could possibly get interest rates at par with the interest rates on conforming loans.

  • Down Payments

    Down payments are affordable on conforming loans. You have different options to choose from with respect to the initial payment (down payment), starting from a meager percentage of 3% of the value of the assessed sale price of the home. With jumbo loans, it is 10% of the value of the sale price of the home is the minimum you can get and that is if you are fortunate to get that, the down payment rate is usually set at 20%.