What is a 30-Year Jumbo Mortgage?
Mortgages can be defined by their length, interest rate and size. For example, common mortgage lengths include 15- and 30-year terms and interest rates can either be fixed or adjustable. Comparing the size of a mortgage, loans for large amounts of money are referred to as "jumbo" loans or mortgages. Jumbo mortgages come with additional stipulations because they pose a greater risk to the lender.
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Features
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A 30-year jumbo mortgage can be defined by its name. First, the term is 30 years. This means that the mortgagee will be responsible for payments for 30 years. These payments include both the principal balance and the interest charges. Second, the term jumbo means the loan is for a large amount. In most states as of 2010, the amount is set at $417,000.
Function
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Two governmental agencies control most of the residential and commercial mortgage loans. They are known as Fannie Mae and Freddie Mac. These agencies partner with mortgage companies to provide protection from financial loss. If a homeowner defaults on mortgage payments, the government will purchase the property from the lender for an agreed amount. Jumbo mortgage amounts exceed the pre-determined limits either governmental agency is willing to pay a lender in case of default.
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Considerations
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Not everyone is eligible to qualify for a jumbo loan. Because of the large loan amount, the monthly mortgage payments are also very high. Borrowers wishing to apply for a jumbo loan must meet strict criteria. A high credit score is the first requirement. Earning a monthly income capable of supporting the mortgage payment is the second.
Interest Rates
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In general, jumbo mortgages carry a higher interest rate than traditional mortgages. In most cases, borrowers can expect to pay approximately 0.5 percent higher than the average rates in the industry. Lenders charge higher interest rates on jumbo mortgages because these mortgages pose a greater risk of default.
Exceptions
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For the 48 continental United States, the District of Columbia and Puerto Rico, the jumbo rate as of 2010 is $417,000. However, properties in Alaska, Guam, Hawaii and the US Virgin Islands have a jumbo rate of $625,000.
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References
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