A jumbo mortgage is a loan that exceeds the conforming loan limits as set by Fannie Mae and Freddie Mac. As of 2021, the limit is $548,250 for most of the US, outside of Alaska, Hawaii, Guam, and the U.S. Virgin Islands, where the limit is $822,373. Jumbo loans are just that: they are loans designed for higher balance mortgages and higher priced homes.
Rates may be a bit higher on jumbo loans because lenders generally have a higher risk. But so long as the loan is below the conforming limit set by Fannie Mae and Freddie Mac, they will be competitive and very close to lower balance loans.
A jumbo mortgage is more so for those with high individual income or high joint income, who can financially manage higher payments. The jumbo product allows ownership of higher priced homes as well.
A jumbo mortgage whose balance exceeds the conforming loan limits as set by Fannie Mae and Freddie Mac and are currently $548,250 for most of the US, outside of Alaska, Hawaii, Guam, and the U.S. Virgin Islands, where the limit is $822,373.
Jumbo loans are designed specifically for higher priced homes in higher priced markets. The mortgages are still eligible for secondary market securitization and insured by Fannie Mae and Freddie Mac, which allows for competitive rates to be achieved even on these larger balances.
• Interest rates for jumbo loans are generally competitive and very similar to conforming, lower balance loans.
• You can pay additional above and beyond the required payment to accelerate payoff at any time. You can also pay off the entire mortgage at any time without incurring any prepayment penalties.
• You may be able to qualify for a larger home purchase since jumbo loans allow for larger homes and larger prices.
• You may be able to avoid mortgage insurance with a down payment of at least 20%.
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