Jumbo Mortgage Loans Things You Should Know

Jumbo Mortgage Loans Things You Should Know

Jumbo Mortgage Loans - Things you​ Should Know
The definition of​ a​ Jumbo Mortgage is​ a​ mortgage loan whose total amount is​ higher than the​ standard conventional limits .​
Jumbo loans are simply mortgages for higher-than-normal loan amounts .​
The gold standard of​ normal in​ the​ lending industry is​ what is​ called a​ conforming,​ conventional loan; that is,​ a​ loan that conforms to​ the​ secondary market agencies’ conventional underwriting requirements regarding credit,​ income/asset verification,​ property features,​ etc.
As of​ February 20th,​ 2018,​ the​ maximum amount for this conforming loan is​ $417,​000 for a​ single unit property,​ $533,​850 for a​ 2-unit property,​ $645,​300 for a​ 3-unit property and $801,​950 for a​ 4-unit property .​
The conventional limit for second loans is​ $208,​500 and all loan limits are 50% higher for properties in​ Alaska,​ Hawaii,​ Guam,​ and the​ U.S .​
Virgin Islands .​
These limits change periodically with the​ real estate market.
Most lenders are willing to​ lend over and above these conforming amounts,​ but the​ larger jumbo loan amount translates into a​ larger risk for the​ lender should you​ default on​ the​ loan .​
Simply stated,​ the​ more the​ bank lends,​ the​ more it​ stands to​ lose if​ something goes wrong and they need to​ foreclose on​ that property.
Because the​ lender is​ taking an​ increase in​ risk with the​ size of​ the​ loan,​ they will typically charge a​ higher interest rate than they would on​ a​ loan that is​ within the​ conventional loan limits .​
All lenders vary in​ the​ premium they add for jumbo loans,​ but a​ good rule of​ thumb is​ to​ expect to​ pay an​ interest rate about 0.5% higher than you​ would for an​ otherwise identical conforming loan.
With conventional lenders,​ these jumbo loan amounts are set in​ stone,​ particularly if​ they are backed by Fannie Mae or​ Freddie Mac .​
In other words,​ a​ mortgage for $417,​000 from one lender at​ 6% will almost always be about 6.5% for a​ loan of​ $417,​001 from the​ same lender.

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