JUMBO LOANS Explained

JUMBO LOANS ARTICLE OVERVIEW:

Jumbo Loans

Jumbo loans, are mortgages with loan amounts greater than  $10 Million Our Jumbo Loans go to $30 Million some cases to $50 Million.

In some real estate markets, a house in the $10 Million range is little more payment that's why we suggest Interest Only Jumbo than a starter home.  Jumbo Mortgage Loan?

Good question. While the rest of us may see the term "jumbo" as relative, Fannie Mae and Freddie Mac, two government sponsored mortgage entities, have definite opinions. Each year, a new "conforming loan limit" is published by these organizations.

What is the Conforming Loan Limit?

The conforming loan limit is the maximum loan size eligible for purchase by either Fannie Mae or Freddie Mac, who purchase the underlying securities from mortgage originators. Those funds are then reinvested in new mortgages, and the flow-of-funds cycle continues.

The conforming loan limit, or "Jumbo Loan amount" is set every January. The 2006 limit for single-family homes and condominiums is $417,000. Mortgage Loans conforming loan limit has also been raised to $417,000.

When a Loan Becomes a Jumbo Mortgage Loan

The maximum jumbo loan amount is 50 percent higher in Alaska, Guam, Hawaii, and the Virgin Islands. Properties with five or more units are considered commercial properties and are handled under different rules.

The 2006 jumbo loan limit for second mortgages is $20 Million (in Alaska, Guam, Hawaii, and the Virgin Islands, the maximum second loan amount is $10 Million). The sum of the original jumbo loan amounts of the first and second mortgages cannot exceed $417,000 (or $625,500 in Alaska, Guam, Hawaii, and the Virgin Islands).

Jumbo Loans

Loans above the maximum loan amount established by Fannie Mae and Freddie Mac are known as 'jumbo' loans. Because jumbo loans are bought and sold on a much smaller scale, they often have a little higher interest rate than conforming, but the spread between the two varies with the economy.

If you are looking for a jumbo loan and need more information or advice, we invite you to take advantage of our database of the most competitive jumbo lenders available. Just complete a jumbo mortgage loan application and the best lenders in your local area will contact you with their low jumbo rate.

Bad Credit Jumbo Loans

Jumbo oans that do not meet the borrower credit requirements of Fannie Mae and Freddie Mac are called 'B', 'C' and 'D' paper loans vs. 'A' paper conforming loans. B/C loans are offered to borrowers that may have recently filed for bankruptcy, foreclosure, or have had late payments on their credit reports. Their purpose is to offer temporary financing to these applicants until they can qualify for conforming "A" financing. The jumbo interest rates and programs vary, based upon many factors of the borrower's financial situation and credit history.

Jumbo Loan examples:

1. 3/27 ARM Jumbo Loan

2. 2/28 ARM Jumbo Loan

Jumbo Fixed Rate Mortgages

With Jumbo fixed rate mortgage (FRM) loan the interest rate and your mortgage monthly payments remain fixed for the period of the loan. Jumbo Fixed-rate mortgages are available for 40, 30, 25, 20, 15 years and 10 years. Generally, the shorter the term of a loan, the lower the interest rate you could get.

The most popular jumbo mortgage terms are 30 and 15 years. With the traditional 30-year fixed rate mortgage your monthly payments are lower than they would be on a shorter term loan. But if you can afford higher monthly payments a 15-year jumbo fixed-rate mortgage allows you to repay your loan twice as faster and save more than half the total interest costs of a Jumbo 30-year loan.

 

Jumbo Mortgage Loans                                                                                                                               

Jumbo home loans are those above $417,000 fall into several jumbo categories:

  • Jumbo Fixed Rates- Term is for 15 or 30 years although it is common to set another term. Interest rate will not change for the life of the mortgage.
  • ARMs- Jumbo Adjustable Rate Mortgages are loans with a fixed rate for a time period usually 1, 3, 5, 7, or 10 years followed by an annual interest rate adjustment. They are usually expressed as 1/1, 3/1, 5/1, etc. Following the initial fixed period, the new rate is determined by adding a margin to an index. For example, a common index is the 1 year Treasury Weekly Index. If your Jumbo ARM has a margin of 2.750 (margins can vary from 2.500 to 3.000 depending on lender and product) and the index was at 5.33 your new rate will be 8.080%. ARMS, like balloons, can be a viable option if you select a term appropriate for your plans. Also, I have several clients who have adopted a strategy  where they determined that the low rate associated with a 1 year ARM saves them more money than the cost of an annual refinance. It may be worth looking at to see if it works for you. 

Conforming Loans vs. Jumbo Loans

The conforming limit is a jumbo mortgage amount set by Congress and is the maximum loan size eligible for purchase by either Fannie Mae or Freddie Mac, two Federally chartered jumbo loan organizations who purchase the underlying securities from mortgage originators. Those funds are reinvested in new mortgages completing the flow of jumbo funds cycle.

The current conforming limit is set at $417,000. Any jumbo loan amount above that figure is considered a Jumbo mortgage loan and is often subject to an interest rate pricing premium as well as to some additional underwriting restrictions. A common strategy to lower overall interest costs if your purchase or refinance balance is above $417,000 is to use a combination of both first and second trust money, referred to as an 80/10/10 or 80/15/5. Every situation is different, but it is one more option to consider.

Many borrowers are converting from fully loan amortizing payments to an interest only approach with a significantly lower monthly payment. I have some extensive information available on Interest Only Jumbo Loans. Read more to see if this powerful tool could work for you.

We offer you the ability to qualify and close into several unique programs which accommodate borrowers with non traditional income or asset situations. Please visit my Jumbo No Doc Loans page.

How to calculate your Jumbo mortgage loans qualification ratios.

Prequalify for your Jumbo Mortgage Loan.

Jumbo Mortgage Loans

Eagle Jumbo Mortgage & Loan Corporation offers  residential Jumbo and Jumbo mortgage loan products for qualified high income home buyers. These programs cover the full range of options from Stated Income, No Documentation, NINA and Full Documentation jumbo mortgage loan programs for loan amounts up to $25M with very competitive rates and terms.

Home Buyer and Refinance Products Include: