What Are Jumbo Mortgage Rates?
Jumbo mortgages are those that do not meet the conforming loan limits set by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac. To get a jumbo mortgage, you will have to meet more stringent guidelines and pay a higher interest rate.
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Conforming Loan Limits
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The conforming loan limits are adjusted each year and vary based on the region that you live in. For 2009 and 2010, the limits range from $417,000 in low-cost areas to $729,750 in high-cost areas.
Significance of Conforming Loan Limits
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Fannie Mae and Freddie Mac are government organizations that purchase or guarantee mortgages to bring more money to the mortgage market. Fannie Mae and Freddie Mac not consider mortgages outside of their limits.
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Problems for Jumbo Loans
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Since the jumbo loans cannot be easily resold, when banks issue a jumbo mortgage they are likely to have to keep the loan on their books for the entire term of the loan. Therefore, lenders are more skeptical about issuing jumbo loans.
Effects
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You should expect to pay a higher interest rate for a jumbo loan because of the increased risk of default and greater probability of having to keep the loan.
Requirements
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Jumbo loan applicants are scrutinized more heavily than conforming loan applicants. According to the Wall Street Journal, you will need a credit score of at least 720 and a minimum down payment of 20 percent.
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