A Jumbo Mortgage, (also known as a "non-conforming" mortgage) as the name may suggest, is a large mortgage that exceeds a limit that is set by the nations largest mortgage backers. At present, the limit is $417,000. These mortgages are used to buy higher-priced houses and at the rate that property prices are increasing, more and more clients are having to apply for these mortgages.
The two biggest agencies that buy the majority of residential mortgages in the U.S are Fannie Mae (FNMA) and Freddie Mac (FHLMC) These two agencies modify the mortgage amount limit annually, and this is the maximum amount that the mortgage companies will finance. This leaves large private investors, like insurance companies to purchase these larger loans to be used as secure investments.
Unfortunately, these loans mean that interest rates are generally up to a third higher than conventional loans. The rates depend mostly on the mortgage amount and the type of property being mortgaged. However, when paying back the loan on a Jumbo mortgage, once it reaches a balance that is below the maximum limit set by the two agencies mentioned above, it can be converted to a traditional mortgage meaning that you can then get typical interest rates and monthly payments.
As well as a Jumbo Mortgage, there is also a plan called the Super Jumbo Mortgage that is used for residential properties above an even larger limit. This limit now stands at $650,000!
There are so many mortgage companies on the internet that specialize in these Mortgages, and even offer free quotes and online calculators so you can find a deal that is suitable for you. They explain, in detail, why your loan is classed as a Jumbo Loan, and the options you have when the balance of your mortgage has reached a level below the maximum amount so that you can refinance it with a better, more affordable option. You are more likely to find a Jumbo Mortgage to suit you on the internet and this is where many of the people who have these plans start looking, simply because companies will be competing for your contract! The increased interest rate associated with a Jumbo Mortgage often adds as much as several hundreds of dollars to the monthly payment, so the option of being able to eventually refinance is a godsend! This is because the borrower is seen to be of a higher risk than those who qualify for mainstream mortgages.
The highest rate ever recorded for a Jumbo Mortgage was a whopping 8.5% and the lowest was 5.87%, which just goes to show how varied the rates can be for this type or mortgage plan! Jumbo Mortgages are also seen to make up a very small population of all mortgages. California has the highest number of Jumbo Mortgages simply because property prices are so high.
What you must remember about this type of Mortgage is that it is only the mortgage value, and not the value of the property!
Jim is a writer for the home mortgage information site about Jumbo Mortgage if you want more information about mortgages please visit http://www.mortagesave.com
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