Jumbo and Super Jumbo loans differ than conforming mortgages in that they have loan amounts greater than $417,000 and have a slightly higher interest rate due to added risk to the lender. These jumbo loans that are over 1 million, consider credit scores, income type, and property classification as a means for qualify loan approval.
Jumbo loans will usually require 2 appraisals to confirm the value of hte collateral. This is done because Jumbo loans are considered riskier than conventional mortgages.
Super Jumbo mortgages, which are jumbo loans of $650,000 or more, may require multiple property valuations or appraisals prior to final approval.
Underwriting jumbo loan takes little longer than conforming loans because the lender might need to re assess the value of the property. The appraisal either need to go through the review done by the lender or order another appraisal done on the house. The lender wants to make sure that the value of the property is the fair market value
With a jumbo mortgage loan a borrower is going to pay a little bit higher interest rate than with a traditional conventional loan. Once a Loan exceeds the limits that are set by Fannie Mae and Freddie Mac, which is $417,000 as of 2007, the loan is considered a jumbo loan.
The reason that the interest rate is higher on jumbo loans, is because of the chance of default. The more money that the lender has invested in one particular property, the more risk that they also have invested in that property. More risk also equals a higher interest rate.
Jumbo loans have the same lending options as your conforming loans in regards to interest only, fixed rates, payment option arms, amortizing arms, and 100% financing.
Jumbo loans have different underwriting guidelines than the conventional loans do. The reason for this is that jumbos have to be packaged and sold differently in the secondary market. Investors in the secondary market want to protect themself from default on such large loan amounts.
While a jumbo loan may have a slightly higher interest rate and different underwriting criteria there are many options including subpime loans available even with lower credit scores.
Jumbo loan guidelines will usually require more in the area of assets or cash reserves than their conforming counterparts. Many borrowers use 401K accounts or other retirement accounts to satisfy these reserve requirements.
When the Jumbo loan amount is only a little higher than conforming loan limits, one can avoid pay the higher Jumbo interest rate by dividing the loan amount into two mortgages, one within the conforming limit and a second mortgage to make up the difference.
Another reason for the interest rate and underwriting differences with jumbo loans is that there are different buyers of these loans in the secondary market. There is a smaller pool of buyers because certain entities only buy conforming, or lower loan amount mortgages.
Your mortgage broker will have other large investors, such as insurance companies and banks, step in to fill the need, with maximum jumbo mortgage amounts going to the $1 million or $2 million range.
Jumbo Loans - A jumbo mortgage loan or jumbo loan is a mortgage with a loan amount above the industry-standard definition of conventional conforming loan limits.
Jumbo loans are now required in many of the high priced cities across the country. As home prices have increased, more and more borrowers are using jumbo loans to afford their homes.
Most Reputable Mortgage Brokers have relationships with other large investors, such as insurance companies and banks, which step in to fill the need, with maximum mortgage amounts going to the $1 million or $2 million range. These larger loans are known as super jumbo loans.
Jumbo mortgage loans are above the conformming limits and may be offered by seller servicers of these wholesale institutions, as well as Wall Street conduits who provide warehouse financing for mortgage lenders.
Jumbo Mortgage loan amounts reflect average loan sizes nationwide. Jumbo mortgages apply when agency Fannie Mae and Freddie Mac limits don't cover the full loan amount.
Many companies offer automated underwriting for Jumbo Loans just like conforming loan amounts. Many times there is little difference between jumbo loan financing rates and conforming loan rates with a high quality loan. Lower quality jumbo loans, however, are difficult to finance.
As of 2006, the conforming loan limit is $417,000, or $625,500 in Alaska, Hawaii, Guam, and the U.S. Virgin Islands. Any mortgage amount great than this is considered a Jumbo Loan or Jumbo Mortgage.
Jumbo loans will usually have a slightly higher interest rate than "normal" conforming (non-Jumbo) mortgage loans. One reason being is because they can be considered a higher risk loan for a lender because of the much larger value the lender is lending to a borrower for a mortgage that is classified as a Jumbo Loan. Therefore, if you are comparing rates between mortgage companies make sure that you are receiving quotes for "Jumbo" rates and not just standard conforming rates.
Many Jumbo loans are portfolio mortgage loans that are not sold by the lender. Because of such, the interest rates on jumbo mortgages are typically greater than is normal for conforming mortgages, and vary depending on property types and mortgage amount.
Home loans that are over 1 million can be classified as a Jumbo or super Jumbo loan and have interest rates that are higher than conforming loans. These mega-million dollar loans will be effected by the loan to value ratio and the amount of cash taken out for a refinance.