What Is the Jumbo Loan Limit?
Jumbo mortgages are loans designed for the purchase of high-priced real estate. These mortgages exceed the normal standards for home loans. The limit for standard loans is set by key lenders Fannie Mae and Freddie Mac, which is how the minimum limit for a jumbo mortgage loan is determined. The maximum limit for a jumbo mortgage is less clear and not standardized. Some lenders begin referring to the term "super jumbo mortgage" for homes costing from $650,000 all the way to the $20 million range.
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Defining Jumbo Mortgages
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A jumbo mortgage loan does not conform to limits established by key lenders Fannie Mae and Freddie Mac, according to the U.S. Department of Housing and Urban Development. In decline since the house market troubles of 2008 and early 2009, lenders are promoting their jumbo mortgages once more, according to The Wall Street Journal.
Conforming Loan Limits
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Fannie Mae's conforming loan limits for 2009 are $417,000 for a single-family home in the contiguous United States with a limit of $625,000 in areas of the country deemed to be high cost. In Alaska and Hawaii, those limits have been set at $625,000 for a single-family home and $938,250 for the same type of home in a high-cost area.
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Avoiding the Limit
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Mortgages that exceed loan limits and are deemed jumbo loans are saddled with steeper loan rates of approximately a quarter of a percentage point more, according to mortgageloan.com. Some homeowners have been able to secure two mortgages on one property. Most of the loan would be on the first mortgage with the second mortgage taking enough off the top to avoid jumbo rates.
Jumbo Loan Impact
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The National Association of Realtors (NAR) has spoken out against the limited availability of jumbo loans and the effect the association believes it has on the market. The reduced availability for loans that exceed conforming loan limits is contributing to the continued market slowdown, according to the NAR.
Rates Stay High
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With the high cost of real estate and living in places like Los Angeles, New York and Miami, even normal family homes are being purchased with jumbo loans. In Boston, some homeowners with jumbo loans are stuck with interest rates in the 7 percent range while people with conforming mortgage loans are getting rates as low as 5 percent, according to The Boston Globe. The NAR is pushing for the government to purchase jumbo mortgages in similar fashion to its purchase of conventional mortgages in a bid to lower jumbo interest rates.
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