What is a Jumbo Mortgage Loan?
A jumbo loan is a loan that exceeds conventional or conforming loan limits. In most places the conventional loan limits are $417,000. In some places, where cost of living is higher, the jumbo loan limits are higher.
This begs the question, what is a conventional loan? A conventional loan is a loan that Fannie Mae and Freddie Mac are willing to guarantee. Fannie and Freddie will guarantee loans up to the conforming loan limit of $417,000 (in most areas).
Jumbo Mortgage Loan Rates
Historically, jumbo loan mortgage rates have been higher than conventional loan mortgage rates. Recently, the gap between conforming and jumbo loan rates has decreased. Jumbo loans have become more affordable. There could be a number of reasons why jumbo loan rates have not risen with conventional loan mortgage rates, but one thing is certain; it is a great time to take advantage jumbo mortgage financing.
Perks of Jumbo Loans
While jumbo loans typically require a higher down payment, have higher credit score and reserves requirements than conforming mortgage loans, the perks of the jumbo loan are numerous. Jumbo loans have no private mortgage insurance requirements and savvy borrowers are sure to recognize the tax benefits gained by deducting interest payments (on loans up to 1 million dollars)*.
*Consult your tax advisor for more information on mortgage interest deductions.