Jumbo Loans
The jumbo mortgage loan is classified as a loan amount that exceeds conventional conforming loan limits. The mortgage conforming loan limits are set by two of the largest secondary market lenders, Freddie Mac (FHLMC) and Fannie Mae (FNMA). These two agencies buy the majority of residential mortgages in the U.S. The limits set by them are the highest dollar value of any mortgage loan they will pay from an individual mortgage lender.
2007 Single-Family Mortgage Loan limits – (conforming loans)
Single-Family Mortgage Loan limits effective January 1, 2007:
First mortgages
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One-family loans: $417,000
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Two-family loans: $533,850
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Three-family loans: $645,300
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Four-family loans: $801,950
Note: One- to four- family mortgages in Alaska, Hawaii, Guam, and the U.S. Virgin Islands are 50 percent higher than the limits for the rest of the country.
Second mortgages
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$208,500
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In Alaska, Hawaii, Guam, and the U.S. Virgin Islands: $312,750
Source: Fannie Mae (www.fanniemae.com)
Mortgage loans higher than the threshold limits of the above mentioned loan amounts are considered non-conforming loans. Jumbo loans are considered non-conforming loans.
Typically, the average mortgage rates on jumbo mortgage loans are higher than conforming mortgages, and vary depending on mortgage amounts and property types.
The logic behind the higher rates for non-conforming loans such as jumbo mortgage loans is that Freddie Mac and Fannie Mae can only purchase mortgage loans that are conforming, to be bundled for sale in the secondary market, thus leading to a decrease in market demand for non-conforming loans. Herein, the laws of supply and demand make it for difficult for lenders to sell the non-conforming loans; thus passing the cost on to you, the consumer by charging a higher rate for the home mortgage loan.
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