What Is a Super Jumbo Loan?
The lending market has had to come up with new underwriting standards to service high-end customers. In order to mitigate their lending risk, some lenders have adopted new policies for "jumbo" and "super-jumbo" loans. The differences between the two types of loans are many.
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FHA Definition
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The FHA, or Federal Housing Authority, changed the jumbo loan limit in March 2008 to include home loans up to $729,750. Such loans are offered by private lenders that are overseen by the federal government's FHA regulators. This number fluctuates based on market trends and is available to all those who qualify based on income, employment and creditworthiness.
Misconceptions
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Jumbo and super-jumbo are often used interchangeably by lenders. However, the term jumbo usually describes loans between $400,000 and $1 million while super jumbo generally describes loans that exceed $1 million.
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Differences by State
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Private lenders control how their underwriters will review jumbo and super-jumbo mortgage applicants. However, these guidelines are often controlled by the real estate market in each particular state. For example, a lender in rural Oklahoma will have vastly different standards concerning jumbo loans than a lender in an affluent area on Maui. In some cases, a jumbo loan will be only about $250,000.
Identification
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If you are seeking a jumbo or super-jumbo loan, your loan officer will tell you the differences in guidelines. In general, such loans will carry higher interest rates and fees to reduce the lender's liability. Also, certain privileges afforded to standard underwriting, such as stated income and flexibility in creditworthiness, will not be available to super-jumbo mortgage applicants. Again, this is because of the lender's attempt to mitigate lending risk.
Warning
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Jumbo loans are risky even for affluent borrowers. Large loan amounts mean large property values. When real estate markets swing up and down, the most expensive properties are affected more significantly than cheaper properties. Therefore, it's possible to obtain a super-jumbo loan and then suddenly find oneself upside-down on a property after a real estate slump.
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