Everything You Need to Know About Jumbo Mortgages

 

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According to Zillow.com

Jumbo mortgages are more flexible than many home buyers realize, and typically have lower rates than most other available mortgages today. The guide below will help you understand what a jumbo loan is, and whether it’s right for your financial situation.

Origin of the term “jumbo mortgage”

Jumbo mortgages are also called non-conforming mortgages. These are loans that lenders make when a borrower doesn’t “conform” to the guidelines of Fannie Mae and Freddie Mac. Created by Congress in 1938 and 1970, respectively, Fannie Mae and Freddie Mac provide stability and affordability to the mortgage market by buying “conforming” mortgages from lenders, giving lenders liquidity to make more mortgages.

Fannie and Freddie only buy mortgages meeting their guidelines for down payment, credit score, post-closing reserves and, of course, loan size.

In 2015, the conforming loan size limit is $417,000 nationwide, with exceptions as high as $625,500 in certain high-priced markets.

Loans greater than these limits are usually called jumbo mortgages or non-conforming mortgages.

Jumbo rates lower than conforming rates

Historically, non-conforming loans had rates at least 0.25 percent higher than conforming loans because lenders were perceived as taking more risk making non-conforming loans that couldn’t be sold to government-backed Fannie Mae and Freddie Mac, and this risk translated into higher consumer rates.

However, a conforming/non-conforming rate paradox has been in effect the past two years, making non-conforming loan rates lower than conforming rates.
To learn more go to:

http://www.zillow.com/blog/jumbo-mortgages-179904/